Buying a home can be a minefield if you don’t educate yourself about the process first. Many of the savviest homebuyers don’t have a clue as to the importance of a CLUE report.

The Comprehensive Loss Underwriting Exchange (CLUE) database is maintained by ChoicePoint, one of the country’s largest compilers of personal consumer data. It is designed to permit homeowner and auto insurers to exchange information about claims for loss of property, without notice to you unless required by your state. Approximately 90 percent of all insurance companies that underwrite homeowner’s insurance are subscribers of the service.

Actual property loss claims, as well as inquiries about coverage, are entered into this central database. When you buy a house and apply for homeowner’s insurance, the insurance company can access the CLUE database and see both the past claims filed on the house and any inquiries about damages, even if no claim was ever filed. This information may cause your dream house to become an insurance nightmare if no insurer is willing to cover it.

What’s more, it isn’t only your new house’s past claims that insurers examine. Your old claims could come back to haunt you. In fact, you may find that your new homeowner’s policy comes with a high price tag because of the previous claim history on your old home.

So, how can you keep CLUE from blocking your ability to obtain insurance or causing you to pay higher premiums? Know your rights. CLUE reports are treated like any other credit report under the Fair Credit Reporting Act (FCRA).

According to The Privacy Rights Clearinghouse, you are entitled to:

• Obtain a copy of your CLUE report and insurance scores. Under recent amendments to the FCRA, called the FACT Act, you are entitled to one free copy of your CLUE report each year.
• Be notified by the insurer if they intend to take an “adverse action” based on information in the CLUE report. Examples of adverse actions include denial of a new policy or a new policy premium that costs more because of negative factors.
• Obtain another copy of your CLUE report, in addition to the free one you are entitled to annually, if you have been denied insurance, your policy has been cancelled, your coverage has been limited, or your premiums have increased.
• Dispute inaccurate or incomplete information included in the CLUE report. ChoicePoint must investigate disputes.
• File a statement that must be included in all future reports if you are not satisfied with the investigation.

If you need to dispute information on your CLUE report, log on to the ChoicePoint site at www.consumerdisclosure.com, and follow the instructions.

Keep in mind, that when buying a home, your real estate agent will need to help you obtain a CLUE report on the property because you cannot request a report on a house you don’t own.

Men and women alike often own expensive pieces of jewelry, such as diamond rings, designer wristwatches, bracelets, and necklaces. Not only are these pieces attractive to thieves, they are subject to several other perils as well. Because of the sentimental and monetary values associated with jewelry, proper insurance coverage is of great importance.

A standard homeowner’s insurance policy will pay for jewelry damaged by fire, smoke, vandalism, windstorm, and several other causes. Coverage is also available for stolen jewelry, but only for a maximum of $1,500 or $2,500. This limit applies collectively to all items of jewelry, furs and gemstones stolen at the same time; it does not apply separately to each item. It will not pay for pieces that are lost or that mysteriously disappear. In the event of a loss, the insurer will pay only the cost of replacing the item less depreciation. (more…)

Many people collect paintings, sculptures, antiques, and other works of art with values ranging from garage sale prices to thousands of dollars. The International Risk Management Institute states that art becomes valuable for one of three reasons: cultural significance; owner’s subjective value; or the marketplace’s estimate of its worth. Regardless of the reason, damage to a valuable work of art will likely cause the owner significant financial loss.

A standard homeowner’s insurance policy provides some coverage for fine art, but is unsuitable for high-priced works. The insurance company will pay for losses to art caused by fire, water damage, vandalism, theft, and a limited number of other causes. In the event of a loss, the company will pay the item’s replacement cost after subtracting depreciation. For example, if fire destroyed a painting worth $1,000 on the open market, the homeowner’s policy would pay the cost of replacing the canvas, paint and frame after subtracting some amount to reflect the age of those materials. This amount may be nowhere close to the work’s market value. (more…)

Standard homeowner’s insurance policies offer sound financial protection for most people. However, those who own large homes that would cost upwards of $500,000 to rebuild may have special coverage needs for which the standard policies were not designed. Such homeowners may own expensive jewelry or have costly business equipment at home, or they may be involved in public activities that make them targets for lawsuits. People with these exposures to financial loss may want to consider buying a high-value homeowner’s insurance policy. (more…)

About two out of three U.S. homes are underinsured, according to a 2008 survey by Marshall & Swift/Boeckh LLC (MSB), a leading provider of building replacement cost data. Based on this new data, the average homeowner’s policy only insures the home to about 82% of the projected replacement cost of the home. Over the past decade, this point has been driven home as the U.S. has endured hurricanes, wildfires, and tornadoes.  Throughout the course of natural disasters, thousands of homeowners were left without enough coverage.

Although the study did not show results regionally, nationwide the average policy falls 18% short of the projected cost to rebuild the house. Put in other terms, the owner of a house insured for $200,000 would be short by $36,000 of the funds needed to rebuild, if the averages held true.

Why do thousands of Americans find themselves in this predicament?  The most common reason for all of this is quite innocuous: homeowners often forget to update their policies.  For instance, suppose a homeowner decides to put an addition onto their home, which would drive up the value of the property beyond the stated policy limits.  If the home improvement is never reported to the insurance company, no additional coverage is added to the policy. Additionally, rising construction costs and ever-changing building codes are raising the price tag to rebuild.

To avoid this problem, homeowners should re-assess policies as they renew each year. If a homeowner suspects a change in the value of their home, this suspicion should be communicated to his or her insurance agent.  Although not every homeowner wants to insure to the full replacement cost of the home, this possibility should at least be examined and considered.

Is Your Home Properly Insured?

Here are some tips to help you evaluate your homeowners’ insurance:

• Understand what your policy does and does not cover.  Remember that  just because your bank requires your policy to cover the mortgage at a minimum, this does not mean your insurance should be based on this amount. You need to insure your home, not the mortgage on your home.

• If available, consider adding an inflation guard to your policy.  Although this will cost extra money, it will help offset the rising cost of rebuilding, should disaster strike.

• If building codes change, which they inevitably do over time, you will most likely be required to rebuild according to the new laws. The older the home, the more expensive it will be to bring it up to code. In most cases, policies will not pay for these extra costs. An “Ordinance or Law Endorsement” can help pay these hidden costs.

Talk to builders in your area to get an approximation of replacement costs. The going rate per square foot for new construction should be considered in estimating replacement costs.  Current appraisals are also an excellent source to utilize.

Is your property at risk of damage from flooding? If you answered “no,” think again. Every property has a flood risk; some may have a more severe risk than others, but all have some risk. A home on a lakeshore has a pretty obvious exposure to flooding. So, however, does a building miles from a body of water, located on a street with storm drains on it and a steady water supply. Because standard homeowner’s and commercial property insurance policies do not cover flood losses, the federal government makes insurance available through the National Flood Insurance Program. The NFIP evaluates the risk (and determines the insurance premium) for each property in a participating community according to its location on that community’s Flood Insurance Rate Map. Recently, those maps have been changing, and some property owners have received big surprises.

For a variety of reasons, the Federal Emergency Management Agency, which administers the NFIP, has spent the past several years working with participating communities to update flood maps. Some areas have experienced development that has changed water flow and altered drainage patterns. Soil erosion has impacted other areas, while changes in hurricane activity have affected coastal areas. The new digital maps give more accurate flood risk information on a property-by-property level.

For every property, the flood map changes will produce one of three outcomes:

* The risk level changes from low or moderate risk to high risk;

* There is no change in the risk level

* The risk level changes from high to low or moderate.

According to the NFIP, a low or moderate risk means that the risk of flooding is reduced but not completely eliminated. Such properties are still vulnerable from floods resulting from heavy rainfall, rapid snowmelt, clogged storm drains, and other causes. Properties with a high risk have at least a one percent annual chance of flooding. This means that a property with a 30-year mortgage has a one in four chance of flooding sometime during the life of the loan.

When the NFIP issues new maps, it normally provides a six- to twelve-month period before the new maps take effect. This gives affected property owners time to understand the changes and prepare for their effects.

If your risk level has changed to high, the federal government will require your mortgage holder to verify that you have bought flood insurance. The cost of insurance will increase to reflect the higher degree of risk. The NFIP has “grandfathering” rules to help property owners who built in compliance with the maps in effect at the time of construction or who have maintained continuous flood coverage on the property. This can offset some of the additional cost. The owner of a building that is sufficiently high above the minimum height at which a flood is likely to occur may actually see a premium reduction.

If your risk level has changed to low or moderate, federal rules will no longer require you to buy flood insurance. However, you will still have some risk of flooding, so it may be wise for you to retain the coverage. According to the NFIP, 25 percent of flood insurance claims come from properties with low or moderate risks. You may be able to convert your standard flood policy to a Preferred Risk Policy, which carries a lower cost.

Even if your risk level has not changed, you should discuss your situation with a professional insurance agent, who can suggest ways for you to protect yourself financially from flood losses. The NFIP says that flood is the most common natural catastrophe in the U.S. The time to prepare is before that flood occurs.

Because your home is probably the biggest investment you’ll ever make, you’ll want to take measures to safeguard that valuable investment. The best way to protect your home investment is through homeowner’s insurance.

However, you shouldn’t settle for just any policy. The type and amount of insurance you need depends on your specific home, what’s in it and your personal requirements. But how much insurance is enough? Here are a few ways to you determine just how much insurance coverage you need:

Market value may not be enough

While you may be tempted to purchase just enough homeowner’s insurance to cover the market or resale value of your home, this may not be enough. While the market value may be enough coverage for some homeowners, that’s typically not the case.

Your home’s market value is not the same as what’s known as its “replacement cost.” The replacement cost of your home is the amount of money you would need to rebuild your home to its previous condition if a loss were to occur. This amount is different from your home’s market value, purchase price or the outstanding amount of your mortgage loan.

Especially right now, when property values are falling throughout much of the nation, the market value of your home is probably much lower than its replacement value. Therefore, you should not use the market value to determine how much insurance coverage you need.

Calculate the replacement cost

So, how do you figure out the replacement cost of your home? Your homeowner’s insurance company can calculate how much it would cost to rebuild your home based on the following:

• Square footage of your home
• Type and quality of your home’s construction
• Any updates, special features or add-ons to your home
• Quality and cost of materials used in your home

Read the fine print

Before you purchase a policy, read all the fine print so you know exactly what the policy covers. Homeowner’s insurance generally covers damages to your home and “other structures” on your property, such as a shed, detached garage, gazebo or pool.

In most policies, the amount of insurance coverage you receive for other structures is 10 percent of the amount of coverage you receive on your home. For example, if your insurance policy covers $100,000 on your home, the coverage you would receive for your other structures would be $10,000 combined. If you believe that the structures on your property are worth more than 10 percent of your home coverage, you may want to request additional coverage.

Take a look at your personal liability coverage

Most homeowner’s policies also include personal liability and medical expense coverage. Generally, your homeowner’s insurance company will pay up to $100,000 on a legitimate civil claim against you for an injury that occurred on your property.

However, this still may not be enough to cover a major lawsuit. You might consider purchasing a separate personal umbrella liability policy, which can offer additional protection. This type of policy offers a higher level of liability coverage and ensures that you and your family’s assets will be protected if someone sues you for damages. Umbrella policies typically pay up to a predetermined limit, which is usually $1 million, for liability claims made against you and your family.

Protect your valuables

If you have particularly valuable jewelry, artwork or collectibles in your home, you may want to opt for even more homeowner’s insurance coverage for additional protection. You may assume your valuables are fully covered by your homeowner’s insurance, but that’s not always the case. It all comes down to what’s called the “sublimit”-this is the limit on the amount the insurance company will pay for specific types of personal property. Although your policy’s total personal property limit may be $75,000, the sublimit for jewelry may be as low as $1,500.

Read through your contract and find your policy’s sublimit for artwork, jewelry and collectibles. If your valuables are worth more than the sublimit, you may want to purchase additional insurance to cover them. You can purchase what’s called a “floater” and have this worked into your homeowner’s policy. Insurance floaters typically cover one specific item, so if you have multiple valuables, you may need to purchase floaters for each item you want to insure.

Talk to a professional

Discuss your unique homeowner’s insurance needs with your insurance agent. He or she can help you determine what kind of policy will best fit your needs and whether or not you may require additional coverage.

The idea of a newly constructed home is exciting, and it is one of the few truly handmade products still available to us today. With new construction, you gain the opportunity to customize your home inside and out.  Unlike buying an existing home, you select the design, the colors and overall look of your home. It can be an exhilarating experience, but if you decide on this option you should take time to familiarize yourself with important details regarding new construction.

The first rule of thumb is to always use professionals. Choose a realtor who has extensive experience with new construction, and ask for his or her involvement from the very start. Your realtor will look out for your best interests in a way that your builder will not.

Before selecting a builder, be certain to investigate their background. Make plans to visit a subdivision the builder worked in previously, and talk to a few of the homeowners there. Ask them if they were satisfied with the construction process and if the builder followed through on repairs and completion dates.

Another factor to consider is the builder’s financial strength and stability. Successful builders with solid reputations are more likely to hire the best  subcontractors and suppliers.  These subcontractors are largely responsible for the actual building of your home. It is crucial to find a financially successful builder who will still be in business during the warranty period of your home.

Before making an offer, you should be aware that the list price of a new home is usually non-negotiable. However, you may be able to negotiate some upgrades with your builder such as tile or carpet or even upgrades in exterior features. Some builders may offer incentives if you obtain your mortgage with the lender of their choice. Such incentives could include covering all or part of your closing costs. If a builder makes a promise such as this to you, ask them to put it in writing.

Before building your new home, always think about resale. For example, a special feature such as combining two small bedrooms into one large room may be attractive to you, but may be a negative to a future prospective buyer.

In general, you should set an expectation that your home may not be completed on the day specified in the contract. In fact, some contracts will include a range of completion dates since construction could be delayed by weather, inspection delays and/or material shortages.

Prior to signing your final contract, review in detail all possible “add-ons”. If you decide to add on extra items at a later date, this could affect the completion date and invariably cost more.

As a buyer, it is in your best interests to secure your own independent home inspector. Although this creates an additional expense, it is well worth the cost to have an inspector observe the construction process during various stages of completion. Even though builders must follow strict guidelines in home construction, an independent inspector will recognize poor quality and mistakes that could result in major repair costs down the road.

You will have a final walk through before your closing, and in most cases, a “punch list” of to-do items will be created at this time. These items will be completed after the closing, but within a specified time period agreed upon by both you and your builder.

Lastly, maintain a paper trail of all documents, change orders and lists. Should there be a dispute of any sort in the future, you will be covered.