Thousands of landlords and holiday home owners buy the wrong buildings and contents insurance for their properties, leading to significant personal and financial risks.
Research by insurance firms reveals that property investors are price-led and look for the cheapest cover – which often means buying the wrong policy.
Many landlords and holiday home owners do not realise that standard home insurance policies do not cover letting properties.
In the event of a claim, they are unlikely to pay out, leaving the owners to settle any claim out of their own pockets.
If personal injury is involved, this settlement could run into thousands of pounds and could end in personal financial ruin.
One specialist holiday home insurer, Schofields, found a third of holiday home owners with at least one property in the UK or overseas had discovered they had the wrong cover.
Around 80% had only discovered the problem when trying to make a claim.
The study also showed:
- 34% of holiday owners said they did not understand the policy they bought or what was needed
- 15% considered they did not get the best advice
- 18% realised details of the holiday home were wrong
- 53% had policies with overseas insurers
A spokesman for the firm said: “A huge mistake many home owners make is looking for a cheap deal. Our advice is to look for a good value deal instead.”
Insurance giant AXA also produced recent research that showed one in four new landlords had the wrong insurance or no cover at all.
“When you first start renting out property, you may not realise all the legal implications and duties involved. Last year, for instance, we found that a third of these landlords are often inadvertently breaking laws on safety checks and a quarter have the wrong or no insurance,” said a spokesman.
Insurer LV= has also researched the market for homeowners taking in lodgers and found the number has doubled to almost 3% of all property owners sharing their homes in recent years.
The insurer also points out that standard home insurance policies do not cover theft or damage by lodgers.