Why Its Risky To Extend Home Insurance In Probate

If you are an executor or probate professional, I know you have a lot to do and think about.  Extending the existing insurance arranged by the deceased may seem like the best and easiest option when protecting property.  However, it could have disastrous financial consequences for executors or administrators (if there is no Will). Arranging the right insurance with a specialist like Insuristic can be quicker whilst reducing your risks.

Executors or administrators could have substantial personal liability if the insurance is improperly arranged. For example, if inadequate cover is purchased, there are gaps in cover, claims aren’t covered, or the property has been underinsured, it could result in a significant shortfall when a claim value is calculated.

This is more likely to occur if the insurance is an extended standard home insurance policy because they aren’t usually designed for unoccupied property. Existing home insurers might not want to continue to cover the property while it is empty. Still, if they do, they might restrict cover or impose policy conditions that are difficult to comply with, which could result in declined claims if you fail to follow them.

In this post, I will highlight the risks and areas to look out for.

Restricted cover

As an unoccupied property presents a higher risk of claims for insurance providers, many are likely to offer less cover than they do for standard home insurance policies.

It is not uncommon for basic FLEEA insurance cover to be provided, which only covers claims caused by fire, lightning, explosion, earthquake, or aircraft. 

This is a risk for executors or administrators because it would mean common claims like escape of water, theft, and damage caused by break-ins wouldn’t be covered.  Neither would less common but potentially significant claims like flood or subsidence.

If a claim is not covered that could have been under a more specialist insurance policy like that offered by Insuristic, the executors can be accused of negligence (even if you are a lay executor) and be forced to cover the uninsured costs of reinstating the property.  Most people would not have the funds readily available to do this so the consequences can be severe.

To learn more about these risks, check out our blog post ‘FLEEA Insurance Cover and the Risks’.

Even if the insurance provider doesn’t provide this basic level of cover, it won’t be at the same level as what you could get for an occupied property.

Cover varies between insurance providers, so check the policy documents before agreeing to cover.

Underinsurance

A common issue is underinsurance, where the rebuild cost is not insured for the correct amount.

This can be because people base insurance on market value (which isn’t the same as rebuild value), valuations haven’t been updated in years and since then, building costs have inflated, or property improvements have been made.

If the deceased underinsured their property, the executors or administrators are effectively taking on this liability by extending the existing insurance.  As 8/10 properties in the UK are believed to be underinsured, this is a significant risk.

If underinsured, executors may face reduced or declined claims. To avoid this, executors should review existing insurance and if they are unsure of the cost to rebuild the property, either:

• Buy a policy on a blanket sum insured basis, which can reduce the risk of underinsurance, providing the blanket amount is enough to rebuild the property or
• Request a professional RICS rebuild valuation.  Insuristic customers can obtain a rebuild valuation from Barret Corp Harrington for just £115 + VAT (we don’t earn commission on this; it is just a service we provide).

If you would like to learn more about this, take a look at another post I have written called ‘The risk of building underinsurance for executors’.

New Policy Conditions

If you are like most people, you probably haven’t insured an empty property before. Even if you have, the policy conditions provided by insurers vary, making it difficult to keep up. 

If the insurance provider isn’t a specialist, these policy conditions can be onerous and difficult to comply with.   As I have said, this is a significant financial risk for executors.  Failure to comply with policy conditions can result in rejected claims, with the executor or administrator left to foot the bill.

Policy conditions are usually reasonable, but they might be more restrictive than those of a specialist, so you should always check the policy wording before buying the cover to ensure you can comply. Again, to reiterate my point, if you can’t evidence compliance with a policy condition, claims are likely to be declined.

Examples of policy conditions that might be new to you are:

• Property Inspections: Insurers usually require empty property to be regularly inspected. This can be as frequent as every seven days, and you will need to evidence these inspections.
• Property Inspection Reports: These are usually required to evidence each inspection.  You will need to record the date of each inspection and confirm there were no issues.  If there is a claim, you may have to prove you were physically there (i.e. you didn’t just write down a list of visits after a claim has occurred), particularly if the damage has built up over time, for example, a burst pipe.    
• Draining Water Systems: Many insurance providers won’t cover the risk of escape of water, such as from a burst pipe.  If this is the case they will require the water system to be fully drained.
• Keeping the heating on: If an insurer is prepared to cover escape of water and the systems aren’t drained they will require the heating to be left on at a specific temperature during the winter months to reduce the risk of burst pipes.  They might also require the loft hatch to be left open so the warm air spreads to the loft, which is a common area for burst pipes to occur.
• Switching off utilities: Insurers are concerned about the risk of fire for unoccupied properties so will usually require the utilities to be switched off whilst the property is empty (other than for powering heating systems).
• Keeping the property maintained: To prevent losses, you must keep on top of property maintenance.  For example, if a storm dislodges roof tiles, the insurer will expect you to fix this promptly to prevent water ingress. 
• Keep the garden tidy: Untidy gardens send a clear signal that the property is empty and will increase the risk of theft, malicious damage and squatters.  Keeping the garden tidy is likely to be a policy condition.
• Regularly remove or redirect mail: Buildup of mail is another indicator of an empty property and is likely to be a policy condition.

So, whilst these conditions aren’t a risk of extending the existing home insurance, they may not be apparent to you.  Care must be taken to comply with these conditions to prevent uninsured losses.

Lastly, some probate insurance policy cover will end when the Grant of Probate is received, so be sure to check for this as you may find the property is suddenly no longer insured.

If Insuristic insures the property, this condition won’t catch you out as we provide coverage until the property is inherited, sold, or occupied.

Occupied property

It is becoming more common for empty property during probate to be occupied by future beneficiaries, family friends or paying tenants.

In this scenario, the existing home insurance provider would unlikely continue to cover the property as the occupants would not have an insurable interest in it.

If the property is occupied by paying tenants, you will lead a landlord’s insurance policy that is insured in the name of the estate.

If people occupy the property without a tenancy agreement and/or charge, you are unlikely to be able to buy this cover online

If you need to insure property occupied during probate, please contact us and we will arrange for you to be contacted via phone.  

Claims

You will only find out how good your insurance policy is when you come to make a claim, so be sure to check how the insurance provider handles claims before you buy a policy.

Many home insurance providers will require you to report claims directly to the insurer, and not all insurer claims services are equal.  You might not get much support or advice during this process, and as a busy executor, this can be stressful and time-consuming.

Insuristic policyholders benefit from an in-house claims team that can provide advice and support at every stage.  For claims where a loss adjuster is required, they will manage this process and deal directly with the insurer to achieve the best possible claims settlement for the estate.

How can Insuristic Make this easier?

Insuristic has developed online insurance policies designed for insuring unoccupied property during probate which are unlikely to catch you out.

Our policies benefit from our in-house claims service and zero policy or cancellation fees. This means that if you need to cancel the policy earlier than planned, you won’t be charged to cancel, and you will get a pro-rata refund representing the value of any unused cover.

If you are a lay executor or solicitor with the occasional policy to insure, check out our Probate House Insurance Page for details and to get a quote.   A policy can usually be purchased online in two minutes or less. 

Lay executors can choose from three levels of cover and insure for 3, 6, 9, or 12 months.  The property will only need to be inspected once every 30 days, and no written reports are required.  All we ask for is one photo of the front of the property and one of a room inside, taken with a mobile phone on every visit.  Keep a copy of the images to provide to our claims team in the event of a claim to evidence you have complied with the policy condition if you need to make a claim.

If you are a specialist probate firm, such as a solicitor or accountant, that regularly needs to insure unoccupied property in probate, you can talk to us about Probate Pro, our inspection-free product designed for regulated firms. Cover can usually be arranged in a minute, with payment on account. Plus, you will have full insurance broking support for high-value or heritage property or property with issues.

Lastly, if you have inherited the property and it is still empty, you can insure this on our unoccupied home insurance policy until it is sold or occupied.  Again, you can arrange insurance on a 3, 6, 9 or 12-month basis and choose from three levels of cover.