In the current economic climate some landlords are trying to make savings on their insurance premiums, according to new research from LetRisks, one of the UK’s leading providers of property insurance and tenant referencing services.
The firm is warning that landlords may face a large shortfall in insurance payments in the event of a claim and in some cases landlords often can’t raise the funds for the work, leaving them with lost rental income and a property unfit for tenants.
According to LetRisks, most landlords aren’t aware of the implications of under insuring their property, until it is too late. Many believe that as market values of buy to let properties have fallen, their insurance cover should also drop.
But they could be in for a very expensive shock, according to Michael Portman, managing director of LetRisks. ‘In one case, a landlord was left out of pocket by more than £4,500 after suffering a claim for theft and malicious damage. A claim was presented for £8,250 and following the appointment of loss adjusters, the building sum insured was deemed to be inadequate. Unfortunately, the final settlement due to the policy holder was scaled down proportionately to less than half of the agreed repair amount,’ he explained.
‘It is important that landlords check their insurance policy is sufficient to cover the full value of rebuilding the property. They need to look at the levels of cover rather than the premium,’ he added.
He pointed out that in the event of a claim, if a landlord is found to be under insured, most insurers will apply ‘average’ allowing them to reduce any payments. ‘For example, a claim was presented for a fire which caused £25,000 of partial damage.
This was deemed excessive following the appointment of loss adjusters and a figure of £14,195 was eventually agreed to form the correct basis of reinstatement. However, it was established that the sum insured was only 76.5% of the value at risk (£162,000, although the property was underinsured at £124,000),’ Portman said.
‘The policy condition of average therefore applied, proportionately reducing the insurer’s liability to £10,865. Following a deduction of the £250 policy excess, the eventual settlement was £10,615 leaving the landlord with a shortfall of £3,330,’ he added.
