Unraveling the Mystery of Home Insurance: A Cautionary Tale for Buyers, Sellers, and Homeowners.
This true story of one home buyer’s journey sheds light on the often-overlooked nuances of home insurance.
My buyer had her heart set on a charming house in Plymouth, MA that seemed perfect for her needs. As we approached closing day, she reached out to three different insurance companies for quotes on homeowner’s insurance. Little did we know that this would unveil a tangled web of past claims that would challenge her dream of homeownership.
As the insurance responses rolled in, she was met with two vastly different outcomes. One company provided an attractive quote without mentioning any previous insurance claims. The others, however, revealed a startling discovery: five separate claims had been made against the property, totaling over $100,000 between 2018 and 2020. This information not only raised red flags about the property’s history but also resulted in significantly higher insurance premiums, forcing her to reconsider her purchase.
Determined to understand why such disparities existed, I reached out to a trusted insurance representative and learned that insurance companies evaluate properties differently. Some use the claims history of the buyer, not the property itself, when determining rates. However, other companies provide a quote by looking at how many claims have been made on the house being purchased.
My buyer's clean record allowed her to qualify for a lower premium with one company. However, the sellers received high quotes due to the claims they made on the house being sold. But get this, a few of the claims were not related to the house. As the story unraveled, we learned that two major claims on the sellers’ record for the house were not theirs; they were accidentally put on their account.
These mistakes were clerical errors in the insurance system. Despite these setbacks, my buyer chose to proceed with the purchase because the claims were clarified and rectified. However, the closing was delayed a few weeks because the buyer wanted proof that the money the seller received from the insurance company had been used to complete the repairs for which they submitted claims. The sellers did not retain the paperwork as proof, and it took some time to confirm that everything was done correctly.
This experience underscored a significant lesson for everyone involved. Takeaways
For sellers, be upfront about past claims and hold onto all paperwork that fixed the claims. I do not believe the sellers were trying to hide anything I think they forgot about it.
For buyers, when obtaining insurance quotes, always ask how the rates were determined. Are they based on personal claims history, or do they factor in the claims history of the property? Furthermore, obtaining multiple quotes from different agencies can provide a clearer understanding of the property and better pricing.
For homeowners, periodically review your own insurance claims with your insurance company, as mistakes can occur and hold onto your paperwork.