If you are acting as an executor or administrator, it is your responsibility to arrange suitable insurance for any property in the estate.
In the event of a loss, failure to arrange adequate insurance could result in the executors becoming liable to put things right.
This could result in a significant financial liability for the executors. Particularly as the beneficiaries will seek to be reimbursed for any uninsured losses.
A common issue is building underinsurance. The impact of providing your insurance provider with an incorrect rebuild valuation could be significant in the event of a claim.
Leading property rebuild specialist, RebuildCostAssessment says that according to their data:
The rebuild value is not the same as market value.
A rebuild valuation can often be far higher than the market value as it includes:
There are a number of reasons why UK properties are underinsured:
If the building rebuild cost is incorrect, the executors could be in for a shock when it comes to a claim.
This is because some home insurers could refuse to pay a claim if the property is significantly underinsured. But most likely, they will reduce the claim by the amount of underinsurance.
Now consider this fictitious scenario:
This could result in the executors having to find £25,000 from their own funds to cover the difference.
Now imagine this was a fire that destroyed the property. The loss for the executors could have been £200,000, as this would have been the maximum that an insurer would pay in this scenario.
There are plenty of examples of scenarios like this on the Financial Ombudsman website. Here is an example: https://www.financial-ombudsman.org.uk/decisions-case-studies/case-studies/consumer-complains-impact-underinsurance
In this case, the ombudsman did provide some leniency to the insured but the impact to them was still a £100,000 loss.
There are a number of options for the executors:
If all of this sounds a bit overwhelming there is an easier option, which is to get a quote from Insuristic.
We have developed a policy which is designed specifically to help executors insure property that is unoccupied during the probate process.
If the property has 4 bedrooms or less and rebuild value below £750,000 we work out the rebuild cost for you behind the scenes.
The policy you buy then has £750,000 buildings sums insured as standard, meaning you don’t need to worry about underinsurance, providing you are confident your property rebuild valuation is below this figure. If you are unsure whether it is or not, we would recommend completing a rebuild cost assessment to be on the safe side.
If the property is likely to exceed a £750,000 rebuild valuation, you can speak to our underwriting team directly at SJL Insurance. They will be able to provide advice, tell you how to get a valuation and then provide insurance based on a true rebuild cost.
You can find out more about our products below:
You can find out about all of our Probate Insurance products here.
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