Under-Insurance a Risk for Landlords

A new caution has been issued to landlords, considering the risks of under-insuring their rental properties.

Aviva Insurance has found recently that a massive 86% of properties are considerably under-insured.

Under-Insurance a Risk for Landlords

Following this statistic, letting agency Leaders have informed landlords of the dangers they may come to if they do not fully insure their property to the reinstatement value.

Hepburns Insurance Services work exclusively with Leaders. Charles Foster, of Hepburns, says: “In the event of a claim, if you are found to be under-insured, most insurers will apply average, allowing them to reduce any payments.

“For example, if a flood or fire caused £75,000 of partial damage and the property is insured for £200,000, but it’s true reinstatement is £300,000, this would equate to being one-third under-insured. Applying average, this one-third will be taken off your claim and the insurer would then pay out a maximum of £50,000.

“This would leave the property owner with an under-insurance shortfall of £25,000.

“The current economic climate has led to reductions in the market values of some buy-to-let properties. While property owners may be looking for savings during these times, it is important that this is not at the expense of insurance cover.

“In addition, it is important to remember that when you’re letting your property to tenants, a standard home insurance policy will often exclude let properties. For this reason, a specialist landlord insurance, which includes landlord liability cover, is vital if you own a rental property.”¹

Leaders recommend that the sum of the property insured should represent the cost of reinstatement to the existing specification. Ancillary charges should also be contemplated, for example, professional fees.

The suitability of your existing insurance sum can be checked at www.bcis.co.uk/rebuilding.

¹ http://www.landlordtoday.co.uk/news_features/Under-insurance-could-hit-you-in-pocket-landlords-warned