Insurers are being urged to pause the increase on premiums on properties that are in the midst of a fire management crisis, as leaseholders are being bankrupted or being put in grave danger with spikes of 1200% to their home insurance.A spokeswoman from the Association of British Insurers has stated that the increases “reflect current understanding of fire risk”. But can this be allowed to continue when a lot of the people living in these properties were not adequality advised on the associated façade fire risks prior to purchase?
Even MPs have called for an investigation to insurance firms’ behaviour towards these victims of circumstance. Insurers, in turn, are keen to push the responsibility onto the government to ensure the removal of combustible cladding from the towers in question. There have been rumours of a government-funded levy that would pay insurance claims, in addition to the £1.6bn fund to pay for the removal of the cladding, but this has yet to be confirmed.
Whilst this volley between insurers and the government continues, what can we as consultants suggest to freeholders and leaseholders during this time?
First and foremost, you should ensure that your insurance is adequate. Your home, contents and building insurance should be insured to the correct sum as firms can reduce any claim through underinsurance. This is often referred to as “the average clause”. For instance, if your contents insurance is £50,000 but the actual value is £100,000, the insurers only need to pay for 50% of any claim. Thoroughly check your insurance before signing on the dotted line, as it could cost you so much more than a higher premium!
On top of this, you might want to consider extra buildings insurance to cover you on other asset risks, like flooding, damage to underground pipes, as well as alternative accommodation if a claim requires you to move out. This may involve paying higher premiums, but that extra price tag might be the difference between you and an untenable property.
We don’t yet know the outcome of this debate, but keeping your property adequately insured is key to reducing financial risk during this unpredictable time.