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How one five-minute call to your insurance company can dog you for seven years

When your car or home suffers damage, you may wonder if it’s covered under your insurance policies. For example, you may want to know if the water damage in your basement is covered, or if the dent in your fender from a parking-lot incident can be claimed.

A quick call to your agent or insurance company will answer those questions, and you may decide against making a claim because the damage amount is lower than your deductible, or you discover it is not covered by insurance. You may hang up the phone and think the matter is closed. But your insurance company has likely recorded your call and the details of your damage, even if you never make a claim on it. And that five-minute call can dog you for seven years.

That's because many insurers report customers' damage — even non-claim phone questions about "losses" — to ChoicePoint, which maintains the C.L.U.E. (Comprehensive Loss Underwriting Exchange) database. Your C.L.U.E. report details losses reported on your property and losses reported on you (such as your liability for damage to others). Incidents stay on the record for seven years.

Losses recorded by your own insurance company on its internal records could linger longer. One phone inquiry isn't going to cause you trouble. But if you have a string of phone inquiries about damage, or phone inquiries combined with actual claims, you could get walloped with a higher rate at renewal time (depending on your company) or, even worse, have your policy nonrenewed by your insurer.

Nonrenewal has its own set of problems. Now you're forced to shop for new insurance while being dogged a bad claims history. If you can find a company to sell you a policy, you'll probably be charged a high rate as a "risky" customer. State Farm, the nation's largest insurer, says that there's no impact on rates when existing customers call to ask about damage. But State Farm spokesperson Dick Luedke says if someone applies for a State Farm policy and he has a history of claims without payment from other companies, it could impact their application.

Damage control

Unfortunately, there's not much you can do about it.

"If it did happen, you can't erase it," says Bob Passmore of the Property Casualty Insurers Association of America, an industry trade group. If there's incorrect information in your C.L.U.E. report, you are entitled to a correction. But if you made the phone call, and suffered the damage, insurers will keep a record of it.

If there's incorrect information in your C.L.U.E. report, you are entitled to a correction.

When consumers discover phone inquiries are on their records — usually as they're shopping around for new insurance — they often express "outrage and surprise," says Doug Heller, Executive Director of Consumer Watchdog, a consumer-advocacy group. "The problem with this practice is that it really makes people with legitimate claims uneasy about talking to their insurer," says Heller. "When you don’t deal with smaller problems because you’re afraid of making an inquiry, you potentially create larger problems. You should have the right to understand the value and utility of an insurance policy without being dinged for asking a question."

Passmore points out that some phone inquiries can protect your interests. For example, say another person causes damage to your car and you call your insurance company to inquire about coverage. In this case, you might decide to make a claim with the offender's insurance company (called a third-party claim). Your "insurance company takes a record in case other company tells you to take a walk," says Passmore. If that happens, you could then make the damage claim through your own insurer.

It's unclear whether a paid claim looks different from a phone inquiry on your C.L.U.E. report. LexisNexis did not respond to repeated requests for a sample C.L.U.E. report showing phone inquiries. But your own report doesn't have to be shrouded in secrecy. Under the Fair Credit Reporting Act, you're entitled to request your own C.L.U.E. Report.

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