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Home Insurance
How does prior history feature in a home’s insurance premium?
Insurance companies base their premiums on a lot of factors and one such factor is the previous history of the home. Why? A home with a history of problems and claims is more of a risk to be insured. Does this mean that the insurance company won’t offer insurance for such a home? This may happen or you may have to take up a home insurance policy with a higher premium.
When an insurance company has to insure a home on which claims had been made by the previous owner, they put themselves into a situation of having to face the risk of processing claims for the same problems. Such homes have a more likelihood for claims in the future and so they feel the need to charge higher premiums to compensate for the risk they are undertaking.
Many would argue this is unfair. A home insurance simply should not charge premium for a home that had claims in the past. However, a home structure that has succumbed to certain problems repeatedly in the past can face the same issue again and there is a possibility of a claim even if the owner has changed.
What can be done about such a situation? Better to not buy a home with a history of problems. It would only mean more maintenance and of course higher premiums for the owner.
How do you find out if the home you want to buy had problems earlier? You can get such information from the Comprehensive Loss Underwriting Exchange database. It is better to get this information and even your insurer may require you to provide it to them, so that they can know about the home’s previous history.
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