Do you know what CLUE stands for? No, I’m not talking about the board game.
In this case CLUE stands for Comprehensive Loss Underwriting Exchange. Now you might be saying something like, “Ugh! What does this have to do with me?”
Imagine a giant database that tracks pretty much all personal property insurance claims in the country. That’s CLUE. Every time you file a claim, your insurance company will likely submit a report to CLUE detailing the parameters of the claim (as well as keep a record in their own proprietary database). CLUE keeps this information for seven years.
Now imagine you want to go shop for insurance. Any new insurance companies will likely pull your CLUE report as part of the application process. If you have a bunch of claims (or even one or two), then your quoted rates will likely increase.
What can we do about it?
Many people get roadside assistance coverage through their auto insurer. After all, it’s conveniently bundled into the rest of the policy. However, if you get a flat tire or run out of gas and request roadside help, your insurance company may consider it an official claim and add it to your CLUE report.
What if you go shopping at Target and someone dings your car door in the parking lot? Or what if someone steals your computer or TV out of your house? Depending on the level of your deductible, you may be tempted to file a claim against your insurance policy. However, in many cases, that claim activity will get submitted to CLUE. In my experience, it’s often more advantageous over the long run to minimize the claims you file with an insurance company.
To be clear, if you need to file a insurance claim, then do it! But be sure to keep the number of trivial claims to a minimum. Most people can do this by using a higher deductible. For example, if your auto deductible is $250, then a claim for almost ANY damage could make sense. However, if you increase the deductible to $1000, then you’ll likely pay for most minor repairs out of pocket, but you will also see a savings on your insurance premium. By increasing the deductible, you are in effect self insuring any low dollar risks.
And while you’re at it, be sure to avoid all non-essential insurance coverage. You don’t need to insure your cell phone, your new TV or washing machine. If you drive an old, beat up car that isn’t worth much, consider dropping the collision/comprehensive coverage.
Be clear on what insurance is for
What is the purpose of insurance? Well, it certainly is not to provide a pay out every time any little thing goes wrong. Insurance should be used to protect yourself from financial catastrophe! If an event can happen which will severely diminish your financial well being, you should explore insuring against it. For most people, the events we need to insure against include your house being destroyed, a major car accident or other liability event, dying, becoming disabled or severely ill, etc.
Also, keep in mind that insurance companies are a business and they seek to make a profit. On average any insurance you purchase is a money losing proposition for the consumer. If we can prudently reduce our reliance on insurance, then it stands to reason that on average we should be better off in the long run.
