Risk of financial ruin for care home residents with ‘The wrong home insurance cover’
Thousands of homeowners in residential care risk losing their homes because of a common insurance clause restricting cover when a house is not lived in full time.
As their main asset, the value in the family home often underpins the elderly person’s care home funding, so if an uninsured disaster occurs, they risk losing both their house, and their future residence in the care home.
Void insurance policy
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 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. 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.
Colin Bickers of Bickers Insurance Services, warns of the importance of checking cover carefully.
“ Insurers don’t write exclusions for fun. If an incident isn’t covered, you won’t get paid. Make sure you understand the terms and restrictions imposed by your policy and when they will apply. If the cover offered is not adequate, you should find a specialist alternative policy which provides the cover you require.”
The only sound advice – Talk to an expert about your empty home insurance
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.
It may be a cliché and go against the current fad of DIY insurance arrangement on price comparison sites, but with these policies, the small print is as plentiful as it is critical to understand. There really is no substitute to speaking with an experienced specialist to ensure that the insurance policy you rely on to protect your family’s main asset is going to operate effectively should the worst occur.
More information
Bickers Insurance Services, empty property insurance specialists, have produced a factsheet detailing the policy restrictions to look out for and offering advice on what you can do to get more cover.
Colin Bickers is Director of Bickers Insurance Services, specialists in arranging property insurance for unoccupied properties