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Buying A Home: Everything You Need to Know About Contract of Adhesion and Insurance

Written by Posted On Thursday, 31 May 2018 12:45
Buying A Home: Everything You Need to Know About Contract of Adhesion and Insurance Photo by Staff Sgt. Teresa J. Cleveland

If you’re in the process of buying a home or hope to buy one in the future, it’s vital that you get a crash course in home owner’s insurance, and really, insurance in general before making any significant decisions. Between adhesion contracts and deductibles, there’s a lot you need to understand about the insurance industry that goes hand-in-hand with buying a home. To make sure you’re not confused by anything and that there are no surprises, here are a few things you need to know before getting homeowner’s insurance.

Do Plenty of Shopping

Most of the time, your lender will recommend an insurance provider, but you are in no way obligated to do business with that company. Even if it seems like a trustworthy company with positive reviews, it’s usually best to check out at least three to five different insurance companies before deciding on one. You should ask friends and relatives if they have any suggestions, read online reviews, and learn as much information as you can about different insurance providers before calling any of them to inquire about getting insurance. 

Know Insurance History of the Home

Taking a tour of a house and asking questions is essential before buying a home, but it’s not covering all of your bases. You’ll want to check out a database called CLUE (Comprehensive Loss Underwriting Exchange) before making any big decisions. This database provides pertinent information about insurance claimsfiled at any particular property that may be on your radar. Most prospective home buyers don’t realize that insurance claims from the last five years can impact the cost of your insurance, regardless of you being the owner during that time or not. Of course, CLUE provides most of the information you’ll want to be aware of anyway before buying your home.

Get Enough Coverage

Insurance can be a tricky thing. You don’t want to overpayand have a policy that you don’t need, but you also don’t want to be left high and dry because it doesn’t cover enough. Insurance is all about finding the sweet spot so you don’t go broke from paying the insurance and you don’t go broke from not having enough. For example, just because you don’t live in a flood plain doesn’t mean you don’t need flood insurance. After all, insurance is supposed to be for things that you don’t expect to happen. This is where visiting the CLUE database comes in handy; if there’s been a claim filed at that property previously, odds are you’ll want coverage.

Expect a Contract of Adhesion

The adhesion contract in insuranceis one of the more secretive elements of the industry. They are common with homeowner’s insurance because no homeowner wants to be without coverage. Essentially, an adhesion contract is an agreement that one party will draw up and that the other party signs without any input. As it relates to home insurance, the insurance provider will write the contract, and the homeowner will have to take it or leave it. There is no back-and-forth with the insurer and no modificationsthat can be suggested. With an adhesion contract, it’s essential to read every detail before signing. Just because you have no say in it doesn’t mean you can’t know what’s in it. If you don’t like something in it, you may want to keep looking for a provider. Contracts of adhesion are a big part of the reason why you need to shop around and look at different insurance providers before making a decision. 

Sources:

http://www.insureuonline.org/consumer_homeowners_ten_tips.htm

https://www.realtor.com/advice/buy/buying-home-insurance/

https://www.law.cornell.edu/wex/adhesion_contract_contract_of_adhesion

https://loans.usnews.com/things-to-know-when-buying-homeowners-insurance

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