If you are a landlord, a time will probably come when you will need to make a claim under your insurance. Hopefully, things will go well and your claim will be covered. However, this is not always the case.
I had a chat recently with Samantha Faulkner, one of the claims handlers at Alan Boswell Group (specialists in landlord insurance), about the issues that often arise. Here are the six problems that we identified.
1 Failing to give the insurer proper information
Insurers are not going to pay out unless they have full details of your claim. So although there is no harm in just notifying them that you are likely to be making a claim, be aware that your insurer will not be able to give you any feedback about your claim unless you tell them what it is!
For example, it may be to do with water damage – but was that due to water ingress through a damaged roof, maybe due to a storm, or was it due to the tenants leaving the taps running? Those two situations will get a very different response from your insurers and if the claim is down to the tenants having left the taps running it may not be covered at all. It depends on the type of policy you have.
Which leads us on to point 2:
2 Not knowing what your policy covers
Not everything will be covered by a ‘landlords insurance’. You need to check it when you take it out.
Most people don’t want to do that as, on the whole, insurance policy terms and condition are not an easy read. But if you don’t read it, don’t be surprised if you find when making a claim, that your claim is not covered.
For example, landlord insurance policies will normally not cover:
- Vermin damage
- Damage done to another property (eg where a water leak damages the flat below), or
- Tenants own contents. Tenants need to have their own insurance for this.
They may also, depending on the policy type, exclude cover for:
- Malicious damage by tenants
- Flood damage
- Accidental damage
There are also often problems when leaseholder landlords fail to take out proper insurance believing (wrongly) that everything is included in the freeholder’s insurance policy. I discussed this here.
This can be a big problem. If you try to save money by taking out insurance for less than the properties value, you will normally find that your claim will be reduced proportionally.
For example, assume that the cost of rebuilding your property is £70,000 but you insure it for £35,000. If you have a claim for, say, water damage and the cost of repair comes to £6,000 (after the excess) – as you have underinsured by 50%, your claim will also be reduced by this amount – so you will just get £3,000 rather than the full £6,000.
You need to take care with contents policies too. Be wary about insuring for the minimum amount. If there is a fire and the kitchen is destroyed – will, for example, £5,000 be enough to cover all the contents?
4. Fair wear and tear
You should also be aware that your insurance will not cover damage due to fair wear and tear.
So even though your flat may have been in spit spot condition when let – if it has been returned in a worn out condition because it has been occupied for two years by a family with three young boys, you will not be able to claim this on your insurance (or in most cases from the deposit) as this sort of damage counts as fair wear and tear.
Damage due to fair wear and tear is an expense which landlords have to bear as part of their ‘landlord business’. Even though you may not consider it to be a business!
5. Damage to unoccupied properties
Most landlords insurance policies will only provide cover for a limited number of days if the property is unoccupied. In some policies, it may be 30 days. Others may offer only 14. Alan Boswell Group’s landlord insurance policy offers 90 days cover.
But if your property remains unoccupied beyond the specified number of days you need to notify your insurers and arrange for extra cover (which in most cases should not be a problem).
If you don’t – then any claim after the time limit will not be covered.
6. Failing to check tenants and/or carry out inspections
For certain types of claim, in particular, if you are claiming for damage due to having inadvertently let your property to cannabis farmers (assuming this is covered by your policy in the first place), you will need to prove to your insurers that you have carried out regular inspections of the property during the tenancy.
In most cases, it will be expected that you will have done, or tried to do, inspections every three months.
A classic situation is where a respectable looking couple offer to pay 6 months or a years rent up front. Often landlords will just take the money and fail to check them out (thinking why should they when the tenants have paid up front?). If you then fail to do any inspections and find that your property has been trashed by cannabis farmers at the end of the term, you will have little chance of having your claim paid.
You must ALWAYS check out tenants carefully and keep all credit checks and reference information carefully.
You should also try to carry out regular inspections. If you are unable to gain access, this should put you on alert. However provided you are able to show proof that you have at least tried to carry out inspections (eg copies of letters, notes of phone calls, attendance notes etc) then your insurers will probably pay out your claim.
But it is important that you act responsibly by checking tenants carefully and doing regular inspections, and are in a position to prove that you have done so. As in every other aspect of a landlords work, proper records and paperwork are vital.
As you will see from the above, many of the problems landlords experience when making claims are down to sloppy practice when the insurance is taken out. Even if you can’t face reading the terms and conditions in full, you should at the very least check over carefully what exactly your policy covers and make sure that this is what you want.
A decent insurance broker should advise you and make sure that your policy is suitable for your needs. Problems often arise when landlords take out an insurance policy just because it is cheap.
If you want to find out more, check out our free Insurance Mini Course which goes into more detail about all aspects of landlords insurance.
If you want to talk to an adviser at Alan Boswell Group about your insurance cover, click here.
With grateful thanks to Samantha Faulkner of Alan Boswell Group for her help with this article.