Property insurance is an umbrella term to cover insurance relating to all things property. While this generally incorporates a building or construction of some sort, it may also include land, both occupied and unoccupied, as well as cover for a properties contents, cover for alternative accommodation and even loss of rent for landlords.
In this guide, we will discuss the different types of property insurance available and when they might be applicable.
Before we start, there are two terms you should familiarise yourself with.
Cover– A cover is an element of insurance which is triggered by a claim under certain conditions. For example, property owner’s liability, or contents insurance.
Policy– A policy is the agreement taken out which may involve many different covers e.g. commercial property insurance, unoccupied property insurance, this guide breaks it down by policy, discussing the individual covers when applicable.
Why do you need property insurance?
A property is in many cases the most valuable asset an individual owns, and for this reason the owner may wish to consider insuring against loss or damage to this asset. Whilst home insurance isn’t a legal requirement like as car or employer’s liability insurance, you may be required to have this cover when taking out something such as a mortgage. It is also worth considering that, if someone is injured on your property and you are found to be liable, the financial implications can be serious.
There are many factors that can influence the cost of an insurance policy. It is important that you as a customer do not try to ‘cut corners’ on the insurance. If you are not covered correctly, this could leave you at a huge financial loss when you try to make a claim and you discover that you don’t have the cover in place you believed you had.
As your broker, we will talk you through the available covers and any considerations for the property, but ultimately, you have to be honest throughout in order for any cover to be valid. With that in mind, there are adjustments you can make to your property in order to make it more insurable and lower any potential premiums, factors include:
- Increased Excess: A higher excess, means you’ll pay more out of your own pocket in the event of a claim, but it can significantly reduce your premiums. Assess your financial situation and determine if raising your excess is a viable option.
- Improve Home Security: Installing security systems, smoke detectors, and burglar alarms can lower the risk of theft and property damage. Many insurers offer discounts for homes with enhanced security features.
- Upgrade Home Safety Features: Updating your home’s safety features, such as removing nearby trees, reinforcing the roof, or modernising electrical systems, can lead to reduced insurance premiums.
Get A Property Insurance Quote For The Cover You Need
Standard home insurance, commonly referred to as homeowners insurance is a policy for people who own the property, either outright or on a mortgage, and live in it. It is a type of insurance policy that provides financial protection to homeowners against damages or losses to their property and belongings. This type of insurance policy typically covers damages caused by natural disasters, theft, vandalism, and other unforeseen events. It may also cover additional living expenses in case the homeowner needs to temporarily relocate due to a covered loss. Home insurance policies can be customised to meet the specific needs of the homeowner, including protection for expensive personal items and liability coverage.
Speciality Home Insurance
At SJL Insurance Services, we understand home insurance isn’t a one-size fits all policy. We specialise in non-standard home insurance. Non-Standard home insurance is required for properties which don’t conform to standard home covers, every case is unique, but some common examples include:
- Home lets or holiday homes
- Short term rental
- Non-standard construction (such as not brick walls and tiled roof)
- Properties with specialist features, such as solar panels or a thatched roof
- Self-build projects
- Renovations or conversions
- High net worth properties
- Businesses run from the home address
Essentially, there are countless possibilities to what can be insured, so there is no harm in asking about your bespoke needs.
Similar to homeowners, landlords insurance provides protection for a property, however, the property does not necessarily have to be occupied by the owner. Common sections of cover that sit within a landlord’s policy include Buildings, Contents, Loss of Rent & Property Owners Liability.
Buildings Insurance- A branch of property insurance. These policies provide protection for the physical brick and mortar/materials of the property.
This Insurance type is most beneficial to those in rented accommodation who are responsible for a landlord’s, letting agency’s or accommodation provider’s property, and who wish to protect themselves against loss or damage to their landlord’s and their own belongings.
Contents refers to the possessions inside a property. Essentially, if you were to take the floors out and turn the house upside down (we do not recommend this!) anything which falls out would generally be considered contents. The contents can be covered against fire and theft, whilst cover for accidental damage is also available .For example if you were to unintentionally knock water over your device while reading this article that would be accidental damage. You can also get contents cover as part of your home insurance should you own the property
Partnered with contents is tenant’s liability. This covers any accidental damage to the property you are inhabiting if you are not the owner, e.g. if the landlord/letting agent was to bill you, this would cover the accidental damages. If you are living in a property which you don’t own these are two covers worth giving serious consideration to.
Different from tenant’s liability, Property Owners Liability protects you (the property owner) from claims against you from members of the public, including tenants following injury or damage to property occurring at your address.
Similar to this is land liability. For example, if someone was to be injured whilst on your land, you could be liable, even if they are on publicly accessible land. Examples of this include
- Animal Grazing
- Development Sites
- Vacant Properties
- Car Parks
- Recreational Land
- Private Roads
- Resident Associations
- Communal Areas
Real estate and commercial property
Real Estate Commercial Property Owners related Insurance can be designed specifically for rented properties, for property owners/investors and property managers, medium sized commercial and mixed portfolios (residential and commercial) to large scale private property companies with significant portfolios.
Unlike the property insurance you might have for your home or own business, Real Estate Insurance for Landlords has other liabilities that should be included in risk protection policies including covers relating to health and safety for their tenants within the properties, maintenance, and management related services.
Our team of Real Estate experts provide insurance solutions for Commercial Property Investors, Build to Rent, Regulated Property Managers (FCA, RICS DPB), Pension Property Risks SIPP & SSAS, Block Management (Flats over £2M rebuild – purpose built) and more, extending to long term unoccupied premises waiting for development.
Heritage and Religious Buildings
Heritage and religious sites hold both a lot of symbolic and physical value so will most likely not be covered under standard property cover. Such buildings are built differently, often host various events and will generally therefore have very different requirements from an insurance policy compared to other buildings.
Architectural repairs on heritage and religious buildings can be incredibly costly and authentic materials can be hard to source. Heritage and Religious Buildings Insurance can help cover the cost for these often-unavoidable occurrences.
Unoccupied property is property without a current occupant, there are various scenarios where this is the case. A lack of occupant creates additional risks, as issues could be longer lasting and damage accumulate due to not being detected immediately. Unlike standard policies, unoccupied insurance can be taken out for shorter periods, typically, 3, 6 or 12 months, or longer if required. Common examples of why a property may be unoccupied include
- You are a landlord between tenants for an extended period of time
- The property is going through probate following the death of the owner
- You are doing renovations requiring you to leave the property
- You are waiting for a property sale to be finalised
We also offer unoccupied probate property, this type of cover may be taken out by an executor whilst a property is in probate after a person had died, and a changeover in ownership is underway.
Property Insurance Claims Process
In the situation where you need to claim on your insurance, it means something’s gone wrong. Having empathy and understanding with our customer can help us to find the best outcome from the policy they have. SJL are an insurance broker with an in house claims team. The beauty of this is we can speak to the insurer, and there is a level playing field in terms of knowledge. The issue with a policyholder speaking direct to the insurer is the insurer has an advantage in using their knowledge of claims which the policyholder most likely won’t possess. As your broker we’d work for our client’s best interests to get claims paid out appropriately, guiding the customer along the claims journey.
If there is an issue with a property that warrants a claim, it is important for the policyholder to determine if the underlying cause can be fixed to stop ongoing issues, after this a cost for the repairs will need to be established. Once this information is available the claims handler can establish a pay-out with the insurer
Insuring a property correctly
A huge issue with insurance at the moment is underinsurance. This affects approximately 83% of properties. When people take out insurance they are asked to give the rebuild cost of the property, many people mistake this for being the equivalent of the properties market value, often resulting in them being underinsured
Underinsuring your property can create a significant financial problem for owners when they come to make a claim. Most policies contain what is called an average clause, which insurers use to ensure that claims paid are proportionate to the premiums they receive. However, policyholders must be aware of what this means for them.
If any property is underinsured, insurers will invoke what is known as the average clause, to limit their liability for any claims.
In practice it works as follows –
Sums Insured £200,000 – Building Rebuild Cost £400,000
Under Insurance calculation – The rebuild cost that the customer has insured their property for when they took the policy out. The amount a surveyor calculates the correct rebuild cost to be
£200,000 / £400,000 = 0.5
Underinsurance percentage = 50%.
If this property has a fire claim that causes £50,000 of damage, the insurer will invoke a proportionate remedy and reduce the claim settlement by the percentage that the property was underinsured.
In this example, the owner would receive a claim settlement of £ 25,000, leaving them to find £ 25,000 from their own funds to replace what was lost.
REMEMBER – Underinsurance applies to any insured property. This can be the buildings, stock, contents, plant and machinery. It can also apply to things such as loss of rent, if this is based on your building sums insured.
How to mitigate underinsurance
RebuildCostASSESSMENT.com, offers an online solution, which is an affordable online service which can protect your home from the potentially severe consequences of underinsurance. For unusual, listed, or commercial properties, a site visit is required, in order to correctly assess the rebuild cost. You should ensure that this is completed by a RICS’ organisation. Whether you are using a desktop solution, or a site visit, rebuild cost assessments should be done every 3 years as a minimum, or whenever there is a significant change to the building.
Index linking may or may not be applied to your policy, you should check your documentation to see whether it is included or not. Index linking is used by insurers to reduce the risk of underinsurance, by increasing the sums insured at each renewal of the policy. However! You should not rely on index linking to address the risks of underinsurance when your policy is due for renewal. Index linking is based on a national average, so is likely to be insufficient on a policy by policy basis. Factors such as location, type of build and fluctuating material costs can have a significant impact on building rebuild costs, which are not addressed by Index Linking. In addition, as stated above, hyperinflation, rising material costs, COVID-19 and Brexit have had an unprecedented impact on building costs that are unlikely to be covered by standard Index Linking. It is the customer’s responsibility to ensure that their sums insured are sufficient and there is no substitution for regular, professional rebuild cost assessments.