Benefits tenants and the effects on landlords insurance

by Readers Question

9:37 AM, 21st March 2013
About 7 years ago

Benefits tenants and the effects on landlords insurance

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Benefits tenants and the effects on landlords insurance

Benefits tenants and the effects on landlords insuranceWe have one buy to let property and a friend mentioned in passing that our landlord insurance policy may not be valid on that property if the tenants are claiming unemployment benefits.

Having contacted my insurance brokers they confirm that that is the case and want to charge us £236 for another policy.

I spoke to our tenant and he is working part-time but “not officially”.

So back to the broker again and they said if he is working up to 16 hours a week and claiming working tax credits or claiming housing benefit then the policy that is in place will cover him.

I imagine his comment about “not officially” means that he is not paying income tax, because we do know he is working part-time at a residential care home.

In theory, he is a “carer” for his sick wife.

Therefore, would you pay the extra £236 to ensure the correct cover if you were me?

He is, in fact, an exemplary tenant. The house and garden have never been so well cared for and he has paid his rent on the dot for the last five years with no problems whatsoever.

Any advice please?

Thanks

Stewart Wicklow



Comments

Mark Alexander

9:40 AM, 21st March 2013
About 7 years ago

Hi Stuart

My advice is shop around. Also, you will see at the top of this page, just below our header, we have an Insurance section. Click that and have a look at our "Landlords Insurance - Landlords Buying Club". You can also access the page by clicking the following link >>> http://www.property118.com/index.php/landlords-insurance-landlords-buying-group/

12:42 PM, 21st March 2013
About 7 years ago

So let us say one takes on a tenant who passes all DD checks but on whom you don't bother obtaining a RGI policy on.
They are working and you have a normal; LL insurance policy.
5 months into the tenancy the tenant's job is made redundant.
The tenant manages to scrape enough in HB and other monies to pay the full contractual rent.
Nearing the 6 month AST period end the property burns down!!!
During the loss adjuster enquiries it becomes known to the adjuster that the tenant's employment status changed and they were on full benefits.
As a result of their insurance clause; which state NO HB tenants they decline to pay their claim!
Leaving the LL with an effective hole in the ground on which he has a mortgage and with no ability to rebuild in that hole!!!

Effect; LL bankrupted!!!............................and probably homeless when the BTL mortgage company come after the LL for full repayment of the mortgage; forcing sale of the LL resi property!!
I would be inclined to obtain a LL insurance policy that covers all types of tenants.
You can never know when you tenant starts to receive HB unless you are the thought police!!

Mark Alexander

12:51 PM, 21st March 2013
About 7 years ago

Hi Paul - the landlord would clearly appeal to such a decision and would take up the case with the relevant Ombudsman. If the landlord could prove that he had done the referencing I doubt very much that the insurance company would stand a cat in hells chance.

Mark Alexander

12:56 PM, 21st March 2013
About 7 years ago

PS - I doubt it would ever get that far. It would be PR suicide for an insurance company to take such a stance.

13:11 PM, 21st March 2013
About 7 years ago

I admire your optimism; I would however take the cautious stance of obtaining insurance; if possible to cover any type of tenant; even if the status changed during the tenancy.
Perhaps that is just me being paranoid!!........................................but I wouldn't trust an insurance company as far as I could throw them!!
Remember any complaint could take months to resolve during which time there would be all sorts of issues, like mortgage payments, alternative tenant accommodation etc.
Severe cashflow issues transpire!!

Mark Alexander

13:26 PM, 21st March 2013
About 7 years ago

Really - so if you had a very large portfolio you would insure every single property for every single eventuality would you? Are you aware of how much extra this would cost? If I were you Paul I'd get paranoid about being paranoid. They are all out to get you Paul, especially the insurance broker who put this crazy notion into your mind LOL

17:25 PM, 21st March 2013
About 7 years ago

He did tell us he was working though - and we know for sure that he is working at the care home albeit on a part-time, undeclared basis. We did find it a little embarrassing asking him if he was "unemployed". So where would you stand on that one? I am sure he would deny working at the care home if he were pushed. Also, Mark is correct, the cost presently for a working tenant is £136 pa. It is over £230 as he is claiming benefits. In the end I think we are better covering ourselves and in the end the broker ran it passed the underwriters just to make sure. I am peeved about having to pay more insurance but he has been an exemplary tenant so worth keeping.
Mark - just because Paul may be paranoid does not mean that they are not out to get him!

Mark Alexander

17:54 PM, 21st March 2013
About 7 years ago

My paranoia comment to Paul was a poor attempt at humour LOL

0:51 AM, 22nd March 2013
About 7 years ago

Senario, to turn this one around what if you as a landlord had a tenant out of work on benefits claiming housing benefit and you had declaired this to the insurance company who charged you at the higher rate. Your tennant at some point in the tenancy term got a full time job. If the house burnt down would the insurance pay up?
So my point is why should it make any difference if your tennants are working or not. If the reason is because they are a greater risk because of being at home all day i dont think so. Firstly they cant afford to put the heating on and secondly they cant afford to put anything in the oven.

16:15 PM, 22nd March 2013
About 7 years ago

I think the status of your tenant; if you know it is something that insurance companies would call a 'material fact' should be advised to them.
So if your HB tenant began working you advise and if tenant stops working and is on benefit you advise.
Yes it appears that premiums will be adjusted.
The 'adjustment' is so small as to not be worth worrying about.
Better to be insured for the tenant type correctly than NOT..................................................you just NEVER know.......................or is that me being paranoid again!!!!??

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