What you need to know about home insurance during divorce.

Whether the divorcing couple is on good terms or bad terms getting divorced can be rough. It can be stressful, time-consuming, and confusing with all of the paperwork that goes into it. Chances are both parties are listed as shared parties on a lot of documents, including insurance policies.

How is the disposition of the marital home affected?

The person who stays in the marital home after the divorce will need to make sure that the homeowners' insurance is under his or her name. Likewise, the person moving out must make arrangements to purchase new homeowners or renters policy for the new residence. Previous insurance claims on the marital home may also cause problems and the property may be deemed uninsurable to new buyers.

Experts suggest that filing 2 claims within 3 years will subject an individual consumer or home to a significant risk of being rejected by insurance carriers.

What is a CLUE Report?

The Comprehensive Loss Underwriting Exchange (CLUE) report details a seven-year period of personal auto and property claims. Insurance companies use CLUE reports, generated by LexisNexis, in the underwriting process and to determine premiums. It is a comprehensive database of personal property information relating mainly to insurance claims on private property.

What type of information is found on a CLUE report?

The typical CLUE report contains information about either an insured or a property. This includes general information about the insured such as name, birth date, and sex, as well as current and previous addresses. The key information on the report is the claims history of the individual or the property. 

The claims section of the report includes a list of all claims made in the last 7 years.

Here’s a list of what you’ll find on your report if you’ve made any claims within the last seven years:

• Date of loss
• Loss type
• The amount the company paid
• Policy number
• Claim number
• Insurance company name

It is important to note that the CLUE report details the “claim history” of a given consumer. Many consumers have been surprised to find that such history may include virtually any call made to an insurance representative regarding a loss, whether or not a claim for compensation is actually filed. Thus, experts warn consumers to think twice seriously about their deductible, coverage, and other factors before calling an insurance representative. Adverse information that is more than seven years old generally may not be reported.

How can a CLUE report pose problems for homeowners or future homeowners?

When faced with a prospective insured, insurance providers use the CLUE database to find out information not only about the customer but also about the residence to be covered. Often this will cause problems for homeowners who have recently purchased a property. If they assume they will be able to get insurance easily because they always have had coverage and have never made any claims, they may be surprised when they are turned down based on claims made on their new property by the previous owners.

Want to see your CLUE report?

CLUE reports can only be obtained by an individual for the home or property he or she currently owns and resides in. Furthermore, a consumer who has been the subject of adverse action based on the information in the report is entitled to a free copy of the report if they request it within 60 days of the adverse action. Adverse action can include denial of coverage or an increase in premium charges. Insurers are obligated to notify consumers when adverse actions have been taken.

LexisNexis lets you request a copy of your consumer file once every 12 months. To access your file visit https://consumer.risk.lexisnexis.com/

Involving a Certified Divorce Lending Professional (CDLP™) early in the divorce settlement agreement can help the divorcing homeowners set the stage for successful mortgage financing in the future.

Divorce Mortgage Planning is the process of evaluating your mortgage options in the context of your overall financial objectives as they pertain to your divorcing situation. Working directly with your divorce team, a CDLP™ understands the intersection of divorce, tax, real estate, and mortgage financing. The role of the CDLP™ is to help you integrate the mortgage you select into your overall long and short financial and investment goals, to help you minimize your taxes, and to minimize your interest expense and maximize your cash flow. 

This is for informational purposes only and not for the purpose of providing legal or tax advice. You should contact an attorney or tax professional to obtain legal and tax advice. Interest rates and fees are estimates provided for informational purposes only and are subject to market changes. This is not a commitment to lend. Rates change daily – call for current quotations.  The information contained in this newsletter has been prepared by, or purchased from, an independent third party and is distributed for consumer education purposes.

Copyright 2021—All Rights Divorce Lending Association