As a landlord, it is a legal requirement to have insurance for your property. But all too often it is often treated as just that: a requirement; a tick-box exercise supported by comparison-happy meerkats then filed away. As with all insurance, the hope is that it will never be needed… until it suddenly is. Your tenant or managing agent calls and instructs you about a fire, attack, flood or worse at your property.
For any landlord, an incident at your property can cause turmoil with the worry of lost earnings, distressed tenants and a barrage of urgent logistics to manage. For a new landlord, inexperienced with handling the finer workings of the insurance machine, it can be especially daunting.
How can you make it through these times with your sanity and investment intact and, above all, ensure your insurance provides the payout that you need?
Choose Your Insurance Carefully
When you’re going through the first steps of how to let a property, make sure you fully understand the terms and conditions you are agreeing to with your insurer and where the potential dangers lie. For example, many policies exclude damage caused maliciously by anyone legally allowed to be in the property, which includes your tenants and any guests they may have.
As such, if your tenants turn your buy-to-let into a cannabis farm, the costs to you as a landlord for this deliberate vandalism could be huge. Even policies that do cover malicious damage may not offer high levels of cover, so be sure you’re clear and comfortable with the insurance you’ve bought.
What About Your Managing Agent?
For insurance companies trying to use this approach to avoid payment, the onus falls on the landlord for being responsible for the selection of suitable tenants for the property. However, any landlord knows that the reality of checking up on their tenants is a difficult balancing act between showing the prudence to protect their investment and the risk of invading their tenants’ privacy. If you cross the line, you risk alienating good tenants or, worse, them taking action against you.
If you use a managing agent, make sure you understand what services you’re paying for and the responsibilities they have assumed on your behalf.
For example, you may feel the damage caused to your property is your agent’s fault for not showing due diligence in tenant selection or monitoring the property. But if they haven’t accepted the responsibility to be your acting agents, operating only as rent collectors, you’re left without recourse and the repair costs could all land on you.
First Steps After the Incident
Once you’ve been informed of the incident at your property, you should try do the following:
- If the incident may be a criminal offence, call the police first.
- If you can, get onsite and take photos of the damage.
- Try to touch as little as possible other than to limit further damage e.g., stopping internal leaks
- Try to identify who caused the damage. As we’ve seen, you may have challenges if your tenants were responsible. However, if your property has been broken into and vandalised, your insurance should cover you – as long as they agree the damage was caused by vandals.
- Contact your insurer.
Get Someone on Your Side
Where the damage is substantial, you may also wish to contact an independent loss assessor.
During the insurance investigation, your insurer will use a loss adjuster to explore and analyse the incident. They will look at the cause and scale of the loss and report back to your insurer. They may also call in their known or own surveyors to scope out the work to restore your property and then refer to contractors on their own panel. All of these people work for your insurer and have their client’s best interests at heart; not yours.
A loss assessor is a professional that works for and reports to you as a landlord. Their role is to make sure the terms and conditions of your policy are applied to maximise your settlement. In most cases, the loss assessor will run your claim for you, managing the relationship and documentation with the insurer and/or their appointed representatives. They will also provide their own team of surveyors to make sure you have an independent assessment of the scope of works necessary to fix your property.
Don’t Forget Your Own Contents
Your tenant should have insurance for their own contents; you cannot insure anything that isn’t yours – but you may also have certain contents within the property that are easy to overlook when faced with greater structural damage. This could include furniture, carpets, rugs, light fittings and more, in rooms or in communal areas if you own a block of flats.
Similarly, you may have staged the home to increase rental value and, as many landlords do, provided expensive furniture or furnishings for your tenants to enjoy. The value of all these should be considered and factored in when you calculate your losses.
Repairing Doesn’t Have to Mean Restoring
An incident at your property can also be an opportunity for change. Perhaps you want to move a door, re-arrange walls or add a new level. Many landlords feel unconfident approaching their insurers about upgrading after an incident and will allow the insurer’s loss adjusters to induce them to take an indemnity cash settlement.
With so much at stake, landlords will often feel vulnerable and accept this smaller cash settlement which they then use towards funding both the repairs and any upgrades they want to make. Though the end result is what they wanted, the truth is that landlords who do this are spending unnecessarily and are only helping their insurer to pay them less than they deserve.
It is our experience that you can often negotiate with your insurer to have them commit to a full program of works that landlords can then “top up” to implement their plans. Whilst this does not mean that insurers pay for any of the “betterments”, the landlord may still benefit from the economies of scale; not having to install improvements from scratch and able to benefit from the fact that contractors are already on site to deal with the claim reinstatement. If you choose not to work with a loss assessor, do consider engaging surveyors to draw up and cost both the incident-related as well as your preferred reinstatement plans, which you can then use in negotiation with your insurer.
As long as you stay confident and fully understand what you’re entitled to, you may end up with a property that’s actually improved because of the incident.
Article Courtesy of: Truman Loss Assessors