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Hunting for Homeowners Insurance

Homeowners should determine risks, do homework before buying policy

Prior to buying a house, prospective homeowners need to look into homeowners insurance. Not only is it required by mortgage companies, the security net of having home and property insured before an accident or natural disaster provides peace of mind.

Several factors determine the rate and availability of an insurance policy on a home, said Independent broker Ralph Swope of North Arlington.

“The age of the building, the construction of the home, if a home is more than 25 years old, we’re going to look at whether any updates have been made,” he said.

“The location of the home also makes a difference, if it’s within five miles of an incorporated fire department or within 500 feet of a fire hydrant,” he said. Location in regards to schools, hospitals and other services do not make any difference in the cost of a policy, he said.

A person’s credit score may also have an impact on eligibility, he said.

“It’s not the same kind of credit as taking out a loan,” Swope said. “Also, if a person has any prior claims within the past three years, their policy may be looked at a little more closely” before being approved, he said.

The customer’s past insurance claims will be taken into consideration to determine the risk factor of their costs to the insurance company, he said.

“You can’t cancel insurance on someone for weather-related claims like lightning hitting a tree and falling on your roof,” he said. “If you have a leak or frozen pipes, a fire in the home, things of that nature, it may be questioned,” he said, to determine the culpability of the homeowner in the damage caused.

An umbrella policy, which most companies will offer, is an extension of the liability coverage automatically provided with a policy on a house and cars insured by the same company, he said. “Umbrella policies provide for things that wouldn’t necessarily be covered, such as being sued for liable or slander against the homeowner,” he said.

SUPPLEMENTAL POLICIES, such as those that cover damages caused by floods, earthquakes and expensive personal possessions, may be a good idea to consider, but not necessarily for everyone, said Joe McCormick, the corporate relations manager for Allstate Insurance in Fairfax.

“Policies have a limited amount of coverage for certain things that are prone to theft, like jewelry,” he said. The owner should consider items that are not common in most homes, like antiques, rare baseball card collections, extensive home theater or computer systems, for extra coverage, he said.

Most people do not realize that some natural disasters, like floods and earthquakes, are not covered by standard insurance policies.

“Richmond is a prime example of this right now,” he said, referring to last week’s widespread flooding. “A lot of people don’t take the time to know what’s in their policy, what’s covered and what isn’t,” he said.

Flood and earthquake insurance should be considered by those in areas prone to that activity, he said. There are regions of Southern Virginia that do experience some earthquake activity, he said, adding that the problem isn’t limited to California.

McCormick also suggests that homeowners get insurance in advance of their closing date to ensure being covered once they move into their new home. “It only takes a few days to start but you want to make sure that your policy is ready to be issued when you close,” he said.

SOME HOMEOWNERS are having problems obtaining and keeping their policies, especially in high-risk areas, said Amy Ritsko-Warren of the Northern Virginia Association of Realtors.

“There was a situation in Texas that a mold outbreak cost an insurance company so much in claims, it pulled out of the area entirely,” she said.

“A lot of companies are starting to look at places and policies more closely” to determine the potential risk of insuring a home in an area, Ritsko-Warren said.

“An insurance provider has up to 60 days to pull a policy,” she said. “People can buy stop-gap insurance from the state if that happens. The policies are more expensive but will provide coverage until a new policy can be obtained,” she said.

The insurance company may also take into consideration the history of the house itself when deciding to provide coverage, she said.

“You may be fine and not have any claims filed, but if the last owners of the house filed a lot of claims,” she said. “The history of the house and of the old and new owners can make a difference,” she said.

One way to check on insurance claims made by the owners or on a property is to obtain a CLUE report. The report, which stands for Comprehensive Loss Underwriting Exchange, provides a listing of all claims made by an individual in the past five years as well as claims made on a certain property.

“It’s a way of giving someone their insurance score and it also helps companies determine the personal or house’s risk of filing a claim,” Ritsko-Warren said. “Even if you make an inquiry into a claim but do not file one, that can hurt you,” she said.

According to Ken Schrad, a spokesperson for the Insurance Information Institute, approximately $482 million in premiums were paid out to Virginia homeowners in 2001, the most recent year for which complete records are available.