Some day you will sell your investment property. And when that day comes, you will probably be asked to provide a CLUE report or an “insurance” letter of (claims) experience.” If the buyer reviews this information and sees one large claim or multiple claims, that information could be just enough to spoil the sale of your property. This is one very good reason why you (and your property manager) must stop and think before calling the insurance company and filing or even discussing a claim.
The first thing to look at, is your insurance policy deductible. The average deductible for a single-family investment property today, is probably somewhere between $2,500 and $3,500.
If you call-in a claim for a broken window or a few shingles that have blown off the roof, the insurance company will file the claim for you, and then turn around and tell you that the value of the damages is below your deductible and they owe you nothing. And here’s the most important message in this entire article: there is no way to remove, erase, add to, or make corrections to a claim once it has been filed. Some experts like to say that the CLUE Report is written in “indelible ink.”
All insurance companies allow a reasonable amount of time for customers to file a claim. Perhaps the one claim that should be reported promptly, would be a fire. Almost everything else can keep a few days or more. Every insurance policy makes the owner responsible for taking steps to minimize or prevent additional damage, so a tarp over a leaking roof or a wet-dry vacuum to remove water on the floor, are expected costs that become a part of the claim expenses (or could be the owner’s expenses if everything is below the policy deductible.)
Most insurance agencies would prefer that their clients call and discuss their situation with the agency, before considering a panic call to the company’s “800” claims number. The people at the call center have been trained to do just one thing: take claims. They do not evaluate the claim or discuss whether it is a good idea to file the claim. But when you call and talk to your agency or agent, you may have the opportunity to discuss and review the advisability of filing a claim. Many agencies also have a team of reputable repair firms that are willing to go out and take a look at the problem at no cost to the property owner. These repair contractors can tell the difference between a $200 repair and a $5,000 repair, and they will candidly advise the owner as to their best estimate for the cost associated with their situation.
Occasionally, an owner or property manager will call-in a claim for something that is simply not covered by the insurance policy. People call with claims for termite damage, sinkholes or shifting soil, and water on the ground outside the building (flood). A standard insurance policy does not cover any of these, but the after-hours claims center is very happy to place a claim on your record, anyway.
Multiple claims can also be more than just a “red flag” on your CLUE Report. You will probably lose your “claims-free discount”, and with several claims, you may find your insurance company non-renewing your policy at your next anniversary. For most insurance companies,the typical home in Arizona has one insurance claim on their record every 16 years. This average includes claims of all types…not just ones where something was paid for.
by Clark Sanchez
CLARK SANCHEZ taught the CLUE class for continuing education credit for Arizona real estate agents, and has been an Arizona insurance agent for 40 years. Also, a VendorAffiliate with AZREIA for over 16 years. You can contact Clark if you have any insurance related questions at firstname.lastname@example.org