This is intended not as a ‘scare shot’ article but rather an attempt to highlight a real hole in some types of property insurance cover. It’s called the “trace and access” problem.
What is ‘trace and access’ cover?
Let’s assume you’re a landlord with appropriate landlord insurance securely in place.
You’ve been unlucky and had a minor fire in your property. You’ve reported the problem to your insurers and when they come to inspect the damage, you can show them exactly what happened and where.
In a sense, that’s all straightforward.
In other cases though, the situation might be far less clear. For example, you have water appearing on your kitchen floor but can’t see the source. It’s causing damage but you and your emergency plumber can’t tell where it’s coming from.
It could be:
- a leaking pipe in the wall;
- a fractured drain under the floor;
- a blocked drain outside the kitchen;
In such a situation, you can’t describe the cause to your insurers because you don’t know what it is. You also can’t ask your plumber to fix it because they don’t know where the trouble resides.
The reality is, you’re probably going to need to ask your plumber and or a builder to start doing some potential exploratory work. It might end up proving to be extensive and as a result, seriously expensive.
Such work is called “trace and access” exploration and the question for the property owner is – who is going to pay for it?
Landlord insurance policies
There’s a very dangerous myth to the effect that “all landlord insurance policies are the same – apart from price”.
You might discover the unfortunate reality of life if, having run up a very substantial ‘trace and access’ bill from a variety of tradespeople, you find that your existing policy simply doesn’t cover it.
It’s important to be clear here. Your insurance provider will know roughly what the cost of fixing say a broken pipe is. Any claim you make for a far larger amount which has ‘trace and access’ costs imbedded in it, will typically be spotted and questioned then perhaps rejected.
So, the moral of the tale is – make sure that your landlord insurance has trace and access cover provisions included.
While speaking of holes the unwary landlord can fall into, with insurance, it’s worth mentioning the risks of becoming what’s called an “accidental landlord”.
This risk is sometimes derided by those who say it’s no more possible to unknowingly become a landlord than to unexpectedly discover you’re a pilot or surgeon. That’s perhaps amusing but it’s also fundamentally wrong! In fact, by some estimates, ‘accidental landlords’ now account for 1 in six mortgage applications.
At heart, the issue here is that typical owner-occupier property cover will become invalid the moment you start to use your property for the purposes of generating rental income. That can happen very easily and if you’re unaware of the definitions, it could become a fact without you even appreciating it.
Such situations might include:
- letting a spare bedroom to a student during term time;
- doing likewise for holidaymakers on a ‘B&B’ basis during holiday periods;
- putting someone up while they’re looking for accommodation elsewhere (in return for rent);
- letting your house short-term while you’re on extended holiday or business secondment;
In any such circumstances or others like them, you may have unintentionally crossed the line, become a landlord and invalidated your property cover in the process.
So, either don’t do any of the above things or if you do, make sure you take out landlord insurance!