Landlords have been given a fresh warning about the dangers of under-insuring their properties.
It follows a recent finding by Aviva Insurance that 86% of properties are significantly under-insured.
Now letting specialists Leaders have warned landlords about the risks they face if their properties are not insured to the full reinstatement value.
Charles Foster, of Hepburns Insurance Services which works exclusively with Leaders, said: “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 its 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.”
Leaders advise that generally property sums insured should represent the cost of reinstatement to the existing specification. Ancillary costs should also be considered, for example professional fees and demolition.
You can check the adequacy of your existing sums insured by visiting:
Article courtesy of Landlord Today