Kevin Paterson is sales and marketing director at Assurant Intermediary
Buy-to-let continues to be the one silver lining on an otherwise grey cloud hanging over the mortgage industry. Buy-to-let lending has climbed to its highest level in almost three years according to the Council of Mortgage Lenders.
Some 42% of intermediaries said more than half of their buy-to-let cases during the third quarter of the year were landlords looking to add to their buy-to-let portfolios, said a recent survey by Paragon Mortgages.
Whilst income from owner occupied mortgages might be down, intermediaries are benefitting from buoyancy in the rental sector and opportunities to sell associated general insurance.
It is important however, that landlords are suitably protected and aren’t tempted to cut corners on insurance.
Non-owner occupied properties historically have higher delinquency rates and this increased risk represents one of the reasons for higher insurance premiums for buy-to-let. There has been some evidence of amateur or accidental landlords failing to notify their insurer when they let their property out.
These people are unwittingly committing occupancy fraud.
At a time when household claim rates are at their peak, insurers are rejecting claims because of this failure to disclose.
This type of fraud is not restricted to the point of application. The current economic climate is forcing many homeowners to rent out their homes while living with family or friends. This is fine as long as mortgage lenders and/or insurers are informed, so that payments can be adjusted to fit the risk.
But very often, homeowners take this step without considering the serious consequences that could result. Quite apart from the obligations to the mortgage lender, failure to disclose to an insurer the fact that a property has been rented could render the existing policy void, leaving the homeowner high and dry.
The message is clear for intermediaries who have a duty of care to their clients. As the depressed economic climate continues to impact homeowners, the temptation to seek cheaper alternatives will only increase. Insurance cover must be appropriate to the risk.
It’s critical that intermediaries inform their clients that cutting corners with insurance may not only be fraudulent but could also be a false economy.
