The problem With Existing Insurance policies
Most home insurance policies are set up on the basis that the insurance company is providing cover for the main residence, which is being lived in generally on a full-time basis. Usually this will happily accommodate absences of up to a few weeks at a time for family holidays etc without affecting cover.
However, for any prolonged absence, the policy is likely to be severely restricted. The typical exclusions are theft, malicious damage, escape of water from fixed installations, burst pipes, accidental damage. These exclusions are serious. According to the latest figures from the Association of British Insurers, they account for 47% of the claims payments made on domestic property as a whole.
When a property is unoccupied, the risks are magnified further.
A claim for damage caused by escape of water can be 5 times higher than average, due to the fact that it will often be undiscovered for longer periods of time. With water running for many days or even weeks, a typical modest domestic home will easily suffer damage amounting to over £60, 000.
Turning to theft, before assuming there is nothing in a property to steal, be aware of metal thieves, who will target empty properties and will rip out heating systems, hot water tanks and copper pipes from walls, often costing tens of thousands of pounds to clean up and repair the damage done.
With these risks excluded from cover, a householder is left exposed to the risk of the very events which are more likely to happen, and when they do, they can be not just inconvenient, but devastating.
If a house is unoccupied for a longer period, the insurer may apply further restrictions or even cancel cover completely. Furthermore, unless the change in occupancy has been notified to the insurer and cover agreed, the policy might even be made void by the failure to disclose a significant change in the information first provided to the insurer when the policy was taken out.
£250, 000 Claim Declined
In one property insurance claim, a house was so severely damaged by vandalism the repair costs amounted to nearly £250, 000. The insurer successfully declined the claim on the basis that the property was no longer occupied, as the householder had spent a short time in hospital before sadly passing away.
The Financial Ombudsman did comment on the issue some time ago because of a number of disputed claims, stating that unless the definition of unoccupied is clearly explained in a policy, they would give the benefit of any doubt to the policyholder. Following this, most insurers responded by reviewing their wordings and ensuring there was a very clear definition of what constitutes unoccupied, so they are now quite within their rights to turn claims down.
Insurers don’t write exclusions for fun. If an incident isn’t covered, the insurer won’t pay. The householder must understand the terms and restrictions imposed by their insurance policy and when they will apply. If the cover offered is not adequate, alternative cover should be sought.
In the first instance, it is always best to approach the existing household insurer for a cover extension, particularly if the stay in residential care is likely to be short-term. However, their response should be obtained in writing with confirmation that the cover is not restricted.
When an elderly person is facing the difficult decision to enter residential care, they will find the potential problems with their home insurance worrying and a little daunting. It is important therefore that their families or advisors can provide the support and assistance to ensure that the insurance policy relied on to protect the family’s main asset is going to operate effectively should the worst occur.