If you are renting a property out to tenants, whether it be a holiday home, an apartment or a long-term house rental, it’s important that you take out an insurance policy to protect you against any misfortunate circumstances that may arise. These may include issues with the tenant, accidental damage caused involuntarily or maliciously, legal liability and a host of other situations that cover your investment and look after your interests.
Unfortunately, the nature of the business is such that insurance brokers cannot always provide cover, and there are cases in which you may be denied insurance given that you present too much a risk. There are various reasons an underwriter may choose to deny you insurance, let’s take a look at the most common among them.
1. There Is No Tenant
If the rental property is empty with no clear signs that a tenant will soon move in, insurance companies will be more reluctant to offer you an insurance policy – in fact, many will have this stipulated in the fine print. In denying an insurance claim, underwriters are essentially saying that the risk that you and your property represent is too great. For one thing, taking out an insurance policy without a tenant may be considered suspicious – given that it provides less of a benefit to the landlord. Also, complications may arise due to the fact certain insurance policies will cover circumstances in which the rental property is tenantless.
2. The Building Has Been Constructed In An Unconventional Way
Most landlord insurance policies will require the building is constructed ‘by the book’, so to speak. This usually means that it has conventional framing, with a tiled or slanted roof and brick/stone walls. Some policies won’t be offered on homes that have completely flat roofs, given that they are more likely to have problems with leaking and other issues.
3. Your Property Is A Sublet
Subletting situations can be a bit of a red flag for landlord insurance companies. If you are either the landlord of a group of flats that are being rented out by the tenants to others, or you are a tenant wanting to sublet your apartment, it’s going to be difficult to be approved for standard landlord insurance packages.
4. You Are Doing Renovations
If you’re having major renovation work doing on the house, flat or apartment, it’s unlikely you’ll receive a policy until after they are finished. This makes sense given that if the building is being radically changed, the terms that are agreed upon may no longer be relevant and may work against the underwriter. Small renovations are often acceptable, depending on the details of the specific package.
5. Your Tenant Arrangement Is Informal
Unsurprisingly, the necessary forms and paperwork need to be produced confirming the arrangement that you have in place with your tenant. You’re significantly less likely to be able to get a landlord insurance in which there is no formal agreement – which can be common when the agreement is between family members, close friends, etc. Luckily, in these cases there may be more trust between the parties and landlord insurance may not be as necessary.
6. Property Not Managed By A Professional Property Agent
Most landlord insurance policies require the appointment of a professional property agent to manage your rental property. When the tenant breaches the conditions of the rental agreement the landlord or his appointed agent needs to know their way around the various relevant sections of the legislation. Many of these pieces of legislation demand an immediate or timeous response and action. If you do not follow the regulations your cover will be affected as well as you not obtaining the right result.
We’ve discussed a few of the reasons you may be denied a landlord building insurance package – but as always it will depend on your specific situation and the company you’re dealing with. For more information about landlord insurance, don’t hesitate to contact St George Underwriting Agency today.