Divorce can be rough, whether the couple is on good or bad terms. It’s stressful, time-consuming, and confusing with all the paperwork involved. One key issue is homeowners insurance. What happens to homeowners insurance during a divorce? Keep reading to find out.
Impact of Divorce on Homeowners Insurance
The person who stays in the marital home after the divorce needs to ensure that the homeowners insurance is under their name. Likewise, the person moving out must arrange to purchase new homeowners or renters insurance for their new residence. Previous insurance claims on the marital home may also cause problems, potentially making the property uninsurable to new buyers.
Experts suggest that filing two claims within three years can significantly increase the risk of being rejected by insurance carriers.
Understanding the 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 to determine premiums. It is a comprehensive database of personal property information, mainly related to insurance claims on private property.
What Information is Found on a CLUE Report?
A typical CLUE report contains information about either an insured individual or a property. This includes general information about the insured, such as name, birth date, and current and previous addresses. The key information 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 seven years, including:
- Date of loss
- Loss type
- Amount paid by the company
- Policy number
- Claim number
- Insurance company name
It's important to note that the CLUE report details the “claim history” of a consumer. This may include calls made to an insurance representative regarding a loss, whether or not a claim was filed. Therefore, consumers should carefully consider their deductible, coverage, and other factors before contacting an insurance representative. Adverse information older than seven years is generally not reported.
Potential Problems for Homeowners or Future Homeowners
Insurance providers use the CLUE database to gather information about both the customer and the property to be covered. This can cause problems for homeowners who have recently purchased a property. They may be surprised when they are turned down for insurance based on claims made on their new property by previous owners.
Accessing Your CLUE Report
CLUE reports can only be obtained by an individual for the home or property they currently own and reside in. A consumer who has been subjected to adverse action based on the report is entitled to a free copy if requested within 60 days of the adverse action, which includes denial of coverage or an increase in premium charges. Insurers are obligated to notify consumers when adverse actions are taken.
LexisNexis allows you to request a copy of your consumer file once every 12 months. To access your file, visit LexisNexis Consumer Portal.
The Importance of a Certified Divorce Lending Professional (CDLP®)
Involving a Certified Divorce Lending Professional (CDLP®) early in the divorce settlement agreement can help divorcing homeowners set the stage for successful mortgage financing in the future.
Divorce Mortgage Planning involves evaluating your mortgage options within the context of your overall financial objectives during your divorce. 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 financial and investment goals, minimize taxes, reduce interest expenses, and maximize cash flow.
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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
