Case Study
Three years ago a couple purchased a property which required renovation. They moved into the building to complete the work and purchased a standard household policy for buildings and contents.
Once the alterations and improvements were completed they moved out and allowed the property to be let. Unfortunately they did not inform either the insurance company or the mortgage company about the change of occupancy (domestic to sub letting).
A year passed with a tenant paying rent each month at the end of the tenancy they moved out. the house was then left unoccupied. Still they did not inform the insurance company or the mortgage company.
During the void period the property was broken into twice within a short period. The couple put a domestic claim into the insurance company. As there had been two break-ins the insurance company instructed a loss adjuster.
Following the loss adjusters enquiry the insurance company turned down both claims and came off cover immediately.
The insurance company also informed the mortgage company, who were far from happy. The mortgage had been granted on the basis of the property being occupied by the couple and not as a buy to let.
The mortgage company insisted that the couple gain insurance immediately. Extensive research was required to find a company who would be willing to cover based on the case history. There rate was 6 times the normal rate with a £2,500 excess on any one claim.
The couple finally accepted catastrophe insurance only against fire, lightening and aircraft explosion at twice the normal premium.
The moral
Inform the mortgage company if you are changing occupancy of the property.
Correctly insure a property on the right policy
Use a professional letting agent who understands the pitfalls and how to avoid them
