To insure or not to insure

I fear the burden of education will fall on the shoulders of intermediaries to help their leaseholder clients

Kevin Paterson is managing director of Source Insurance

Rising house prices, stricter lending criteria requiring bigger deposits, job insecurity in a recovering economy – these factors amongst others have combined to create Generation Rent and see demand in the private rental sector soar.

The last English Housing Survey published by the Department for Communities and Local Government earlier this year, the number of households renting privately amounted to some 4.4 million or almost 20% of all households.

Almost half (48%) of all households aged 25-34 rented privately and the proportion in this age group living in the private rented sector has more than doubled since 2003-04. Over the same 10 years, owner occupation in this age group has dropped from 59 percent to 36 percent. The number of families with children renting privately has almost tripled in 10 years and there are now more than 1.5 million dependent on private landlords.

The report covered 2013-14 so no doubt the statistics covering the rental market will have changed upwards again for this next period.

While there are clearly opportunities to help landlords with their insurance requirements, there are also opportunities to help tenants – particularly in the younger age bracket. I’m sure that many will be under the misconception that their personal contents are insured by their landlord.

However they’re not the only ones who mistakenly believe it is someone else’s responsibility to take out insurance on their behalf. I read a piece in the Daily Telegraph a couple of weeks ago which reported that one and a half million home owners could be without insurance for the contents of their home because they mistakenly believe that it has been arranged by their freeholder.

I’m sure most of you reading this will be horrified as you will have made insurance responsibilities clear when arranging a mortgage for your clients buying a leasehold property, but research from a price comparison website has found that almost a third of occupants of leasehold properties believed that it was the job of the freeholder to take out both buildings and contents insurance.

Given that there are 5.4 million leasehold properties in Britain, the findings of this research mean that some 1.6 million leaseholders will have to fork out to replace their possessions in the event of fire or theft. And as developers seem to be increasingly offering new build homes as leasehold, this could put an even greater number of homeowners at risk.

It is hard to imagine how so many can be ignorant of their responsibilities as leaseholders and the responsibilities of the freeholder, but this research does indicate there is a real problem. Once again, I fear the burden of education will fall on the shoulders of intermediaries to help their leaseholder clients.

It’s not going to be a case of driving the message home at the point of helping them secure their mortgage. I would encourage ongoing communication at relevant points throughout the year – so perhaps after severe weather in the area and in the lead-up to insurance renewal for example – to remind them. This all serves to demonstrate the value you bring to the relationship and could save them from devastation they could face if they first find that they’ve been burgled and then discover that they’re not insured.