It will come as a shock to many, but renting out a room could invaildate any claim you make on a policy, as Jamie Elliott finds
A ban on renting a room to a paying guest imposed by some of the UK’s biggest insurers means thousands of people may be living with invalid cover. Your policy may also be rendered worthless if you fail to check whether the lodger has an unspent criminal conviction.
Among the companies which refuse to provide home insurance to anyone taking in a lodger, student or otherwise, are esure and More Th>n.
“We cannot provide home insurance to lodgers or paying guests because you [the policyholder] are giving access and responsibility for the security of your house to someone you do not know,” a spokeswoman for esure said.
“If a policyholder takes in a lodger without telling us, their home insurance is potentially null and void because withholding this information counts as non-disclosure.”
Direct Line and Churchill apply the same restrictions, but only if the lodger is a student. “If a policyholder did so [rent out a room] without informing us, this could invalidate the cover,” said a spokesman for Royal Bank of Scotland Insurance, which owns the two insurance companies.
“This is because the lifestyle of students – bringing friends home and perhaps leaving doors unlocked – poses a greater risk.”
However, householders Cash has spoken to, who let out rooms, say they are unaware of these rules and the risk they pose to insurance policies.
“Is that really true? I’ll definitely check the conditions of our policy before going ahead,” says Simon Johnson, who is advertising for a student or professional person to rent a room in the south London flat he shares with his partner. “We are going away in December and were hoping the lodger could look after the flat, but now I’m thinking that could pose a greater risk. I don’t think it’s fair that we haven’t been made aware of this potential problem.”
A Brighton single parent, who was burgled last month and prefers not to be named, says she was shocked because she takes in lodgers and her insurer is challenging a claim for a video camera stolen during the break-in.
“I have rented rooms to students and other people for 15 years and no one has ever said it was an issue, and I’ve never read it anywhere. But now the underwriters are quibbling,” she says. “I have paid thousands in insurance and always thought I was covered, but the burglary has made me realise you are not always protected in the way you think.” .”
It is not just the type of lodger, but their past, that homeowners need worry about. This year Cash revealed how the most minor undisclosed criminal conviction can invalidate home insurance.
We highlighted the case of Michelle Barber, who faced a bill for £240,000 after her house was gutted by fire because she failed to tell her insurer about an earlier fine she had incurred of £150.
It was Barber’s story that alerted Seamus O’Connell – a Cash reader who lets a room in his house to University of London students – to the risk he may be running if one of his lodgers has a criminal conviction.
“It is not clear what landlords can do to deal with this problem,” he says. “They cannot risk having their insurance voided, but students should not be interrogated by their landlord about criminal convictions.”
O’Connell has attempted to resolve the issue by adding a clause to the letting agreement he asks lodgers to sign, which says that the tenant confirms he or she does not have any unspent convictions.
But he remains worried, and says his insurer has been able to offer little reassurance. “It is by no means clear this is a satisfactory way of dealing with the problem. I spoke to our insurer, Zurich, which did not offer any specific advice, except to say that if we have a lodger we would, in any case, not have cover against a theft where there was no evidence of forced entry.”
Zurich told Cash: “We do want a homeowner to ask tenants about criminal convictions because you have to declare, at inception or renewal of a policy, if anyone in the property has a conviction. We could decline a claim and void a policy because of non-disclosure. If the lodger lied to the homeowner we would look at it on a case-by-case basis.
“If the policyholder can prove they have a process including written confirmation, this is as much as they can do.” Jonathan French, of the Association of British Insurers, agrees responsibility for finding out about criminal convictions lies with policyholders.
“You have to tell your insurer if circumstances change, so it is important that, if you have someone come to live with you, including a student or other lodger, you check whether they have any previous criminal convictions,” he says.
Consumer organisation Which? believes insurers should take a more flexible attitude towards policyholders who let out rooms, and says that they need to improve the quality of information they provide.
“It seems very unfair that, in a climate where increasing numbers of people are struggling to buy their own home, householders who rent out rooms are being discriminated against by insurers,” a spokeswoman says.
“The industry needs to provide better, clearer information for policyholders about how their cover relates to lodgers and paying guests. This information must not be buried in the small print.”
What to do
• Let your insurer know straight away
• Ask the lodger to sign a declaration that they have no unspent criminal convictions
• Don’t assume you can’t be covered if your present insurer declines. The National Landlords Association has details of specialist insurance policies: www.landlords.org.uk
• Make a complaint to the Financial Ombudsman Service if you are unhappy with the outcome of a claim: www.financial-ombudsman.org.uk
• For insurance that covers lodgers with criminal convictions go to:www.unlock.org.uk