An important part of the process of buying a new home is purchasing homeowners’ insurance to protect your investment as well as your personal possessions. All lenders require evidence of your homeowners’ insurance policy before the loan can go to settlement and, since homeowners’ insurance is prepaid insurance, you’ll need to pay for one year of coverage as part of your closing costs.

Homeowners’ insurance premiums are based on a variety of factors such as the estimated cost to rebuild your home in case it is completely destroyed by a fire or storm and the likelihood of damage to your home which is determined by the location of your property, its construction type and materials and the pattern of storms or other incidents that have caused past claims on that home or others in the area.

Before you finalize your purchase of a home, most Realtors recommend a thorough home inspection by a licensed home inspector. While a home inspector can help you evaluate anything visible in your home and test you heating, air conditioning, electrical and plumbing systems, the inspector won’t know about past damage or repairs to the property. However, prospective buyers can request information from the sellers about previous issues with the home and can ask the sellers to provide permission to access insurance reports about past claims.

Why past insurance claims are useful

Insurance claims provide a window into what happened to the property such as a frozen pipe burst, wind damage, a fire or mold. In some cases, this may be information about an occurrence that happened before the sellers owned the property.

Insurance claims include a report on an incident and whether a claim was paid for repairs to be made. Once you have this information in hand, you can ask the sellers for more information or ask for an extra inspection of the particular area of the home involved in the claim so you can find out if there is any lasting damage or issue to be addressed.

A second reason to find out about past insurance claims is that they can give you an indication of whether your insurance premiums will be higher than expected or whether you will have trouble obtaining insurance coverage. Clearly, if the claim is due to negligence on the part of the owners, a dog bite incident or something unusual like lightning damage, your insurance premiums are unlikely to be affected.

However, if the past claims are an indication that the house is prone to flooding or is in a location with frequent incidents of theft or vandalism, an insurance company will likely charge more for the added risk associated with the property or perhaps decline to offer coverage.

Two options for insurance claim reports

Insurance claim reports that are available to homeowners are maintained by LexisNexis in the form of a Comprehensive Loss Underwriting Exchange or “CLUE” report.

Homeowners can request a CLUE report for $19.50, which will show claims for the previous five years. Buyers cannot request a CLUE report directly but you can ask sellers to provide one as part of your contract negotiations. Sellers are not obligated to provide the report, but if sellers don’t, this could indicate an issue with the property.

Another option is to visit Housefax.com to request an Insurance Claims Report for $19. Housefax acts as an intermediary between you and the sellers, so as soon as the sellers give permission you can receive the claims report via email.

If you want to avoid surprises in your new home and when you compare homeowner’s insurance policies, it’s best to know as much as possible about the property.