It's no secret that insurance companies have suffered great losses the past few years. Many are taking the offensive and are increasingly using the Comprehensive Loss Underwriting Exchange (C.L.U.E.) database to track claims and losses. While on the surface this might sound innocent enough, information stays in the database for up to 5 years. However, this database is used by other insurers and it could profoundly impact you.
For example, according to a CNBC Money article, a couple in Washington reported a minor water leak to their insurer State Farm. They had not filed a claim in 30 years and ultimately decided not to file one in this case. State Farm, however, cancelled them and reported the information about the home in the C.L.U.E. database. Consequently, other insurers wouldn't write a policy on the home basing their decision on State Farm's damage report.
Although the couple was able to get a bare-bones fire policy for three times the previous full coverage rate, more problems could arise when they try to sell the home if the purchasers are unable to insure the home. In fact, when acting as a buyer's agent, I have begun recommending that purchasers investigate insurance coverage on the home during the inspection period. That way there are no nasty surprises when it comes time to close.
According to the CNBC Money article, the best way to protect yourself is keep your home in good repair, think twice about reporting water-related claims, don't tell your insurer about problems unless you intend to file a claim, and consider getting a copy of your C.L.U.E. report. You can order a copy of your home's C.L.U.E. report for $9 from ChoicePoint, the company that operates the C.L.U.E. database. If you've been denied coverage you can obtain a copy for free.