If one, some or all of the flats in your building are deemed to be uninhabitable after an insured event such as a fire or flood, then your insurance providers can provide alternative accommodation for the occupants for as long as it takes to repair the property.
Initially, a hotel will probably suffice but if a longer absence is expected you can get help to find a rental property. It will be on a like for like basis with necessary extra costs covered; and should anyone prefer to stay with relatives or friends, then subject to the terms and conditions to the policy, payments can be made to cover their hosts’ extra costs as well.
If some or all of the flats’ contents also need to be moved, the buildings insurance may cover the costs in certain circumstances. It will not, of course, cover any damage caused to flat owners’ personal contents. Each occupant should arrange their own contents insurance.
Do you have you enough cover?
You may want to check that you have enough cover for alternative accommodation. Policies differ in terms of exactly what expenses are covered and the amount you’re covered for.
It’s worth checking what the buildings insurance policy allows for with regards to total alternative accommodation expenses and look at how that measures up against the number of residents and local rental costs.
Deacon policies usually allow for a sum equivalent to 33% of declared value of the building. Some policies only allow 10%. Would that be enough for your buildings’ residents? Under some policies there is a time limit when payment will cease, so it is important that you understand what this limit is and consider what would happen to leaseholders if the period of unoccupancy was protracted.
Remember, too, that occupiers of sub-let flats are not usually covered by the provision of alternative accommodation, and you may want to warn owners of these flats to make their own arrangements for their tenants. Specialist landlord insurance is designed to help protect their investment and income in the event of a major loss.
When is a property uninhabitable?
Insurers’ definition of ‘uninhabitable’ is that you do not have a kitchen or bathroom or sleeping facilities. Just having a mess or damage to walls or ceilings is not sufficient for insurers to pay for alternative accommodation.
Usually a loss adjuster will be called in to help with a major incident. He or she will advise if all or any of the flats are uninhabitable, and the insurers or agents will usually then help you find alternative accommodation.
Often a local rental agency is appointed as they have their finger on the pulse of the local rental market. Your managing agents will be involved at this stage too.
Don’t forget that affected leaseholders must seek approval from the insurers prior to making any of their own arrangements, or they may be liable for some or all of the expenses. Just make sure to contact them as soon as possible after an incident.
What if the authorities make you leave a habitable building?
Everything we have described here relates to standard alternative accommodation cover, when flats are uninhabitable due to an insured risk, or ‘peril’, such as fire, flood or storm. This would not provide financial cover if residents were required to leave for another reason for example by instruction from the authorities. That is why Deacon now also offers the option to have alternative accommodation cover should the authorities require evacuation.
The sole purpose of this article is to provide guidance on the issues covered. This article is not intended to give legal advice, and, accordingly, it should not be relied upon. It should not be regarded as a comprehensive statement of the law and/or market practice in this area. We make no claims as to the completeness or accuracy of the information contained herein or in the links which were live at the date of publication. You should not act upon (or should refrain from acting upon) information in this publication without first seeking specific legal and/or specialist advice. Arthur J. Gallagher Insurance Brokers Limited trading as Deacon accepts no liability for any inaccuracy, omission or mistake in this publication, nor will we be responsible for any loss which may be suffered as a result of any person relying on the information contained herein.