Landlords – housing a lodger may invalidate your home insurance.

If you are considering letting a room to a lodger or even letting an entire property, did you know that if you don’t inform your insurers, they may invalidate your policy leaving you with all the risk?

The Observer published an article yesterday outlining the risks involved in ‘non-disclosure’ and highlighted recent comments made from major insurers, “If a policyholder did so [rent out a room] without informing us, this could invalidate the cover” says the Bank of Scotland.

A spokeswoman for esure goes on to say, “We cannot provide home insurance to lodgers or paying guests because you [the policyholder] are giving access and responsibility for the security of your house to someone you do not know.  If a policyholder takes in a lodger without telling us, their home insurance is potentially null and void because withholding this information counts as non-disclosure.”

How can you avoid invalidating your current insurance policy?

First and foremost – tell your insurers
As mortgage lenders require a ‘consent to let’ so too will your home insurers be required to be informed of your intentions to let the property.  Make sure you notify them in writing and request confirmation in writing so that you may challenge any non-payment of claims on this ground.  We advise that you contact your insurers prior to the tenant / lodger moving in however, if they already have, don’t worry too much, you still have time to let them know.  If they refuse to insure your property, you can always find a specialist landlord insurance company to insure the property.

Avoid bad tenants / lodgers – always carry out checks.
The majority of High Street Letting Agents will carry out tenant references as a matter of course.  If you are letting out a property on your own, do not forgo on referencing your tenants.  There are many companies that offer various levels of tenant referencing.

Lettingaproperty.com offer a comprehensive tenant reference service at £29.95 and includes:

• Written verification of employment/income
• Previous letting reference or home ownership check
• Residency confirmation
• Affordability calculation
• Full credit history check including:
  • County Court Judgment (CCJ) search
  • Bankruptcy & IVA data search
  • Linked address checks
  • Electoral roll presence
  • Existing credit agreements
  • Credit Score

Ask your lodger to sign a letter confirming they have no unspent criminal convictions

The insurers, Zurich have made it very clear that they require landlords to confirm that their tenants or lodgers do not have any unspent criminal convictions.  This is a requirement for homeowners insurance and therefore Zurich feel it should be a requirement of the tenant.

“We do want a homeowner to ask tenants about criminal convictions because you have to declare, at inception or renewal of a policy, if anyone in the property has a conviction. We could decline a claim and void a policy because of non-disclosure. If the lodger lied to the homeowner we would look at it on a case-by-case basis. If the policyholder can prove they have a process including written confirmation, this is as much as they can do.”

We would recommend confirmation in writing from your tenant so that you have evidence when being challenged by the insurer.

Change Insurers
If your current insurer is proving difficult, this does not mean that you will be unable to find cover. For example companies which specialise in landlord insurance may be able to assist. For a specific landlord’s insurance quote, you can visit lettingaproperty.com and obtain a quote in under 60 seconds.  We work with Rentguard, one of the UK’s largest providers of dedicated Landlord and Tenant insurance.

To summarise
To avoid placing yourself in a position where your insurance becomes invalidated and you suffer losses as a result, make sure you contact both your mortgage and your home insurance provider.  You are after what is referred to in the industry as “Consent to Let”.  This means that your mortgage provider gives you consent that you may let your property.  You must also get written confirmation from your Buildings insurers or change your insurers to a company that provides dedicated landlord insurance.