Do you check Insurance claims as part of due diligence?

11 Replies

Is there a place to check insurance claims made on a property? Do you check the past claims as part of your due diligence? Will the past claims effect your future insurance costs after the purchase?

excellent point @Kranti K.  

I don't but I shall borrow your idea. 

1 of the property I bought from an auction did have an insurance claim by the a couple of previous owner. I don't think it affected my premiums as I told them I didn't file it. 

I believed insurance brokers can access a database on a per property basis to find out about past claims and even insurance coverage? Hopefully someone from the insurance industry can confirm this.

no. waste of time. analysis paralysis

Insurance brokers can typically see prior claims on a property on what's called a CLUE report. The problem though is that not all insurance companies will report claims to CLUE to have them tracked. So there is no use is trying to track prior claims. Do your due diligence and inspections and you will be fine!

Prior claims on a property *could* impact a policy premium even if you didn't own the property at the time of the loss.  It depends on the company and what type of claim it was.  Also, depending on the type of claim, some insurance companies will want proof that a loss has been completely remedied prior to insuring a property.

Here's an article in the LA Times that tackles the subject.

@Casey J Burkhead - I've never seen a case where a prior owner's claim negatively impacted a new owner. The claim will follow the person, not the property. 

You can purchase the reports from Lexis Nexis. Insurance agents are not allowed to run the report for any reason other than underwriting. So we cannot just run them for due diligence, doing so risks our ability to ever pull them again.

But when I underwrite the insurance for my personal holdings I do pay attention to the CLUE report.

What's a typical cost for a report from Lexis Nexis ?

I have seen where a particular property was high to insure for the buyer because the property had a history of multiple claims against it over time. 

A one off claim could just be an one time event but claims over and over the property could have issues.

This was many years ago and insurance was about 300 higher annually for the policy.

The only thing that would concern me was repeated water claims. The other issues are usually fixed in the claim process but water claims tend to increase in frequency unless the property is completely re piped.

Originally posted by @Tim Puffer :

@Casey J Burkhead - I've never seen a case where a prior owner's claim negatively impacted a new owner. The claim will follow the person, not the property. 

 Only time I've seen this happen is sinkhole.  I've not even seen mold and asbestos have this effect.

Sounds like it's a waste of time trying to get a CLUE report as an investor because it doesn't really tell you how much you'll have to pay in premium and that's really the bottom line an investor would care about. It would probably be better if you have a working relationship with an insurance agent to have them quote you an insurance policy before you go thru with the contract as part of your due diligence. But don't waste the insurance agent time if you're not going to be buying a policy from them, I hate when people do that to me.

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