The topic of underinsurance is more common than you might think. Often, many misbelieve that their block of flats insurance covers the cost for other areas that are not insured, or the sum insured is too low to cover the whole property. This is usually due to not being aware of what's covered under the different areas of an insurance policy. In situations where you have suffered a loss, the last thing you want to hear is that your insurance company either can’t help with the settlement, or the settlement is not what you thought it might be. Find out more on the risks of underinsuring your block of flats and why you should take out a complete cover.
Underinsurance is an insufficient sum insured on your insurance policy so that it fails to provide complete coverage. In the event of a claim, underinsurance can leave you liable for unforeseen financial expenses. If a block of flats is underinsured and there is significant damage to the property, the given amount paid for the claim may not be enough to pay for repairs and replacements.
There are several risk factors involved with having an inadequate block of flats insurance policy. The most common issues that you could encounter include:
Having to pay for more than you anticipated for
It's always important to read your schedule and the associated policy wording. We'd always suggest that if you want to verify anything, you should speak to your building insurance broker if you are unsure. For example, you may have insurance for blocks of flats that states it covers potential hazards and unexpected events. Let’s say you experience an unexpected critical lift breakdown. Although ‘potential hazards and unexpected events may sound like they would cover an event like this, your insurer, unfortunately, might not have included lifts in their definition. The type of insurance for flats that covers this would be called engineering breakdown. This is a common issue where policyholders believe one type of cover bears the cost for all.
Being unable to claim for your loss
If a serious event occurs and you are underinsured, you might not be able to claim for your loss. What’s worse, this could leave you unable to pay the remaining amount. As a result, that one uninsured event could land you in major debt.
Losing the property
Your insurer could decide to cancel your policy or impose a penalty. The penalty could be reducing the amount paid in the event of a claim. This could once again leave you in a position where you are unable to pay the shortfall to put you back in the position you were in before the claim ever happened. The worst-case scenario for not having the right insurance for flats is having to sell your property because you can't afford to pay for the repairs.
Getting housed in temporary accommodation and paying the rent
If your building has suffered critical damage, it might be unsafe for residents to remain. If you end up being temporarily housed in accommodation, you will have to pay the rent unless this is included in your block of flats insurance policy. This will only add further to the financial stress you could already be under.
You can avoid all of the above issues by ensuring you have comprehensive insurance for flats. The best way to do this is to be completely informed of all the insurance options available. We'd recommend speaking to a broker to make sure you have covered off all your property risks, and make sure you won’t be left in the dark. A fool proof solution is to choose a chartered building insurance broker who will review your current insurance policy to see if there are any gaps in your cover or highlight areas of potential underinsurance.
At Flats Direct, we are specialist building insurance brokers who are dedicated to helping you. We also offer risk management services to help you effectively mitigate any risks. If you need advice or help setting up your insurance for flats, contact us. We have a broad range of resources and will assist you every step of the way. Get in touch with us today by phoning 0800 731 6242. You can also send us your enquiries by emailing email@example.com.