Three common misconceptions that are putting the assets of estates at risk
One of the first duties of the probate professional is to identify the assets of the estate and to ensure that they are safeguarded for future distribution according to the wishes of the deceased. Legacies are put at great potential risk because of the way many firms handle the checking of insurance protection on the former residence belonging to the deceased, leaving them vulnerable to huge uninsured losses and exposing the firm to potential claims against them.
Perhaps more surprising is that in most cases, it would be quicker and easier to arrange a more suitable specialist policy at the outset, rather than jump through the hoops required to keep an existing, and often inadequate insurance policy in force.
The existing policy
Household insurance policies are designed to protect a home and its contents during the time it is being lived in by the householder. What happens to the policy cover when the house becomes empty, in the event of the death of the householder, or if they move permanently into care?
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Mistake No 1- No restrictions are applied until at least 30 days have elapsed
It is commonly assumed that every household insurance policy will automatically give up to 30, or in some cases 60 days full cover before any restrictions in cover are applied. This is not the case.
One insurer who specialises in providing insurance policies for the elderly, has the following definition in their latest policy wording (Oct 2013):
- Unoccupied – A house not lived in or not intended to be lived in for more than 60 days in a row.
This means that in the event of death of the householder (or if they have moved into care), the restrictions and exclusions imposed by the policy wording will be applied from day one, as the property is not intended to be lived in for more than 60 days. The following exclusions therefore apply from the day the property becomes permanently unoccupied:
- Attempted theft
- Malicious damage
- Burst pipes
- Escape of water
- Trace and access
- Leaking oil
- Loss of metered oil or water
- Accidental damage to sanitary fixtures
Furthermore, the insurer specifically states that they may void the policy completely if they haven’t been informed that the property has become unoccupied, creating a risk of no insurance cover for any incident unless and until they have been notified and have agreed a change in occupancy.
Mistake No 2 – Standard Terms means standard cover
Often, an insurer will confirm that they are happy to continue to insure a property following notification from the probate practitioner that the house has become unoccupied. They may confirm that they are not imposing additional terms and that ‘standard terms’ will continue to apply.
Unless a written endorsement has been received amending the policy wording, the standard terms that have been confirmed will also feature the standard restrictions in cover, so the exclusions listed above will still normally apply.
Mistake No 3 – It is quicker and cheaper to keep the existing policy in force
If there is an existing household policy in force on a deceased’s estate, you will need to:
a) Check adequacy of amounts insured and cover
b) Inform the insurer of change in occupancy and obtain their requirements for continuing cover
c) Check revised documents and terms to be applied
d) Scrutinise cover again at renewal (if it is offered), as insurers often amend terms
e) Arrange alternative cover if existing policy is not adequate.
After you have contacted the existing insurer and advised them of the change in occupancy, you will need to wait for a written endorsement to arrive before assessing the adequacy of the existing amounts insured and the suitability of the cover for present and future needs. You will then need to make arrangements for implementation of any additional security and maintenance provisions imposed by the insurer as a condition of continuing cover, which may still be restricted.
Specialist unoccupied property insurance
Protection for your client – protection from your client
There is no hiding from the fact that a specialist unoccupied property insurance policy will in most cases be more expensive than the home insurance policy it replaces. However, the advantages more than justify this cost. You can be confident that you have done all you can to protect the assets of the estate with the most comprehensive product available, protecting your firm from the wrath of your clients and beneficiaries if things take a turn for the worse. Furthermore, a quotation will in many cases take less than 6 minutes from call to cover, meaning this aspect of the estate has been concluded in a fraction of the time it often takes to negotiate with a household insurer, who will often refuse to offer renewal, putting you back to square one just a few months later.
It is therefore good practice to implement the immediate arrangement of a specialist unoccupied property insurance policy in every case, regardless of the existence of a household policy.
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