industry news
Warnings on risks of under-insurance
A
large number of private landlords are putting their properties and finances at risk by failing to purchase adequate insurance on homes they are letting to tenants.
Over one third of such landlords (35.6 per cent) hold standard home
insurance products instead of an official landlord policy, meaning they are under-insured and left exposed to risks, according to research by Verdict Financial. A similar warning has been given to tenants by the price comparison
website, Go Compare, who found that many people under-estimate the value of their possessions either deliberately to save money on their premiums, or accidentally because they have failed to update their policy to reflect recent purchases. Residents who underestimate the replacement cost of their home's
contents, or deliberately undervalue them, could end up being thousands of pounds out of pocket if they need to make a claim - making an already stressful experience much worse.
Negligent
The Verdict Financial report, ‘UK Residential and Commercial Landlord Insurance 2016’, which covers both the residential and commercial property sides of the UK landlord market, states that the risks landlords leave themselves exposed to by taking out standard home building and contents policies include negligent behaviour of tenants, damage on the property, or unwarranted occupancy if the home is left vacant. Thomas McCourtie, Analyst at Verdict Financial, said: “Insurers have a key
role to play in educating customers about the necessity of purchasing insurance which corresponds to the intended use of the property. Quality checks can be implemented at the initial application stage or during the purchase process in order to identify properties that are to be let, and for the buyer to clarify which type of cover is required. This helps to ensure that the correct product is purchased. “Given that rented accommodation has become the only real affordable
option for many people, especially those living in large cities such as London, demand is high, and it is therefore important that the landlords supplying these properties are fully protected with the right cover. It also represents an opportunity for insurers to expand their coverage of the UK housing sector.”
Risks
The warning comes as new research reveals that only 48 per cent of home contents policies automatically index-link premiums. While index-linking helps to keep the sum insured in line with increases in prices, it does not take into account any increases in value as a result of new purchases, gifts or inheritances. Research commissioned by
Gocompare.com Home Insurance also found
that a quarter of homeowners have been with the same insurer for five years or more while 13 per cent haven't changed insurer for 10 years or more. If they haven't reviewed their insurance needs and kept the value of their home's contents up-to-date, they could find they are underinsured. Ben Wilson from
Gocompare.com Home Insurance commented: "It's
surprising how quickly belongings and household contents change over time. And, it's all too easy to fall short on home insurance cover, particularly if you haven't reviewed your arrangements for 5 to 10 years.” Wilson continued: "People should not be tempted to underinsure their
home contents order to save some money on home insurance. What many people perhaps don't realise is that if their insurer thinks that they are underinsured - it will pay only the corresponding percentage of a claim. This could result in a shortfall of thousands of pounds. A much better way to get a better deal and save money on your premiums is to shop around using a comparison website like
Gocompare.com." If insurance does not accurately reflect the true value of home contents,
any claim settlement may be insufficient to cover losses. This is because insurers can reduce a pay-out by the level of the underinsurance. Known as the average clause, this can reduce the value of a claim by thousands of pounds.
For more information call 0113 279 5854 or email
sallyann@rainguard.co.uk
www.rainguard.co.uk www.housingmmonline.co.uk | HMM May 2016 | 13
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