In the past, I’ve written about several insurance issues that I’ve learned about as a landlord: the importance of a certain detail (A quick tip to avoid an insurance nightmare), how misleading the term ‘renter’s insurance’ is (Another insurance mistake to avoid), and even the pros and cons of buying an additional warranty (Should you purchase a home warranty?). But here’s one that I never saw coming!
I’m in the process of selling one of my properties. Part of that process includes the potential buyer getting their insurance in place. They, and their lender, want to know that they can get affordable insurance on the property, and they will also be provided with a list of claims from the last 5 years. Since I have NEVER had a claim on that property, I was stunned when the buyer’s realtor contacted me inquiring about my 2018 claim for $5,000 of water damage!
My realtor and I were in a bit of a tizzy for a good hour or two. Was this insurance fraud? An honest mistake? How could there be a claim against my insurance, made by my company?
The answer stunned me. Our renter at that time had made a claim on something (maybe his car? A home that he owned?). The claim was filed from the rental property address, so it was connected to me. I’m still amazed that the one insurance company managed to get my business name and all, but they did. So the claim had nothing to do with my property or my business, and it was quickly removed from my record.
The good news is that this potential mess was cleared up, and the sale moved forward. So why does this matter?
- You could encounter a situation like I did. Mine was luckily cleared up quickly, but I can imagine how it could have caused a real headache.
- If you decide to switch insurance plans, you will have a claim on your record. This will mean a higher rate than you should be offered.
- Most importantly — since this is the factor that definitely happens — your rate will increase. You now have a claim, one that you didn’t make or even know about. Your bill increases, since their computer software thinks that your property has a claim. Basically, you’re funding someone else’s claim. They got the benefit — the insurance payment, and you end of with an unexpected expense — a higher bill.
The solution is simple, and will only take a few minutes. Be sure to do your yearly insurance check-up. While reviewing your policies, ask if there have been any claims. It’s a question that I’ll be asking from now on!