What to Know About Your Home Insurance Application
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UPDATED: Aug 13, 2020
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The home insurance application process makes sure the insurance company has all the necessary information before it can sell you a policy. Understanding what information you need to provide on your home insurance application and why the company has to review it may make your home insurance application process smoother, and help you get the best policy for your needs.
Home Insurance Application and Premium Rates
If you have already received a quote for your home insurance policy, you already have an idea about how much your annual premium will be. However, the home insurance application is designed to gather necessary information about you and your home in order to come up with the actual premium rate for homeowners insurance policy. This could change the quoted premium price.
The home insurance application questions will allow underwriters to further assess whether you and your home is a risk that they would like to insure. Depending on your answers, you may be requested to change or modify your coverage amount to give you more coverage in certain areas. For example, stating on your application that you have a swimming pool could require the underwriter to request that your personal liability coverage be increased from $100,000 to $300,000. Underwriters also may request that you put in place an umbrella policy for further protection. All of this will determine the final calculation of your home insurance premium.
Personal Information on the Home Insurance Application
Signing your home insurance application also allows the insurance company to run other background reports to collect more data for underwriting your home insurance policy. Read the fine print on any application you sign! Signing most home insurance applications gives the insurance company permission to pull the following:
- Personal Credit History: Your credit report will show any bankruptcies, foreclosures and poor paying habits. The assumption is that if you are not financially stable, you will not maintain your property’s upkeep, possibly leading to a claim loss. Furthermore, financial instability could reveal the possible temptation of faking theft claims for money.
- Comprehensive Loss Underwriting Exchange (CLUE): A CLUE report is reviewed during the quoting or home insurance application process. CLUE is a claims history database that enables insurance companies to access consumer claims information when they are underwriting or rating an insurance policy. The report contains consumer claims information provided by other insurance companies. The database contains up to seven years of personal property claims history. If you have had another claim in the past, whether it was at another house or apartment, it is possible that this claim will show up on this report and cause your rates to increase. Depending on the type of claim, the insurance underwriter may increase your home insurance policy premium due to prior loss history or deny your application altogether.
TIP: Ask to see any information your insurance company pulls and make sure the reports are accurate. If there is a discrepancy, let the company know immediately.
Home Insurance Inspections
Most insurance companies do require some form of a home insurance inspection, which could be as simple as a photograph of the home. Here, the underwriters are making sure that indeed the property does exist at the address stated and that there are no visible hazards-gutters hanging, trampolines, swimming pools, falling fences, or dilapidated sheds. You may be asked to gate a swimming pool, repair any noticeable defects, or make any changes that bring the house up to code.
TIP: While detailed reviews are rare, there are specialty carriers that do require inside homeowners insurance inspections as well as inside photos. Be aware that you could be asked to give a detailed tour for different insurance companies.
Finalizing Your Home Insurance Application
There are a few final points that you need to consider before you sign a home insurance application:
- An important part of the home insurance application process is the mortgage clause. Once your application is finalized, you will need to supply the insurance company with any mortgagee clause to be listed on your home insurance policy. This mortgage clause will list the name and address of any lender that has a financial interest in your property. Therefore, if there is any claim, they too will be named as a payee on any claim check or proceeds.
- You will be asked for a coverage start date. Your coverage will be bound or will be effective on this date. Make sure that if you are closing on a new home, that your new home insurance does not start after your closing date. This will create coverage gaps. If you are changing home insurance policies, make sure your new home insurance policy starts on the same day as the cancellation of your old policy. Again, this prevents any coverage gaps.
- If you have selected any riders for your home insurance policy, they will be reviewed carefully. For instance, if you selected a jewelry floater, the insurance company may require either an inspection or copies of certified appraisals before coverage will be provided. A diamond, for example, will not be covered for $10,000 unless there is an appraisal done for that amount. Excess amounts of coverage may even require a photograph of the item. Sump pump or sewer back up endorsements may prompt the underwriter to make sure that the home is not located in a potential flood plan which could further aggravate a claim under this coverage.
Weeding through the home insurance application process is not hard, but requires you take some time and get the accurate information to your insurance company. Make sure you are truthful on your application to avoid any denial of future claims.
TIP: Most underwriting requests are done not only for the protection of the insurance company, but for the protection of the homeowners against personal liability law suits. If you make any changes to your home or property, you need to notify your insurance company and make sure you are properly insured!
If you have a question concerning the home insurance application process, ask an insurance professional. To start shopping with free home insurance quotes, click here for the Free Advice quote center.