Home Insurance: water leak damage -> alternative accommodation -> loss of income

Shoodie

This is a funny one so I need people with a bit of ‘insurance know-how’ for this please… :A

Back in March last year I bought a second home in order to do it up and rent it out.
Later in September however a leak was detected in my existing home and it was diagnosed this had already caused the plaster on most of the bathroom and kitchen walls to blow. Drying company advised (verbally) it would be better if we moved out, the plaster be stripped, and the walls then dried. Could take six-eight weeks. Living in damp conditions for prolonged periods wouldn’t be healthy, I was told. I have a wife and an 18 month old child.
It's February now and, after a lot of to-ing and fro-ing, and on the back of some salt tests on the dampness, the Insurance company have finally accepted liability. Til now no work has been done. We have since moved into our second property to stay safe.
I didn’t think this would take that long to resolve and as a result I’ve lost out on potential rental income all the while supporting two mortgages. Now I’ve recently found out the Ombudsman supports claims for alternative accommodation when the home under repair becomes difficult to live in.

So my question is how can I approach the insurance company about claiming for alternative accommodation when:
1. I haven’t told them we’ve had to live in my second home (fearing they would relax even more!)
2. No repair work has yet started
3. The alternative accommodation is also my property albeit me losing out on rental income as a consequence?

What’s the right way to do this for the best chance of success?

naedanger

Shoodie wrote: »

This is a funny one so I need people with a bit of ‘insurance know-how’ for this please… :A

Back in March last year I bought a second home in order to do it up and rent it out.
Later in September however a leak was detected in my existing home and it was diagnosed this had already caused the plaster on most of the bathroom and kitchen walls to blow. Drying company advised (verbally) it would be better if we moved out, the plaster be stripped, and the walls then dried. Could take six-eight weeks. Living in damp conditions for prolonged periods wouldn’t be healthy, I was told. I have a wife and an 18 month old child.
It's February now and, after a lot of to-ing and fro-ing, and on the back of some salt tests on the dampness, the Insurance company have finally accepted liability. Til now no work has been done. We have since moved into our second property to stay safe.
I didn’t think this would take that long to resolve and as a result I’ve lost out on potential rental income all the while supporting two mortgages. Now I’ve recently found out the Ombudsman supports claims for alternative accommodation when the home under repair becomes difficult to live in.

So my question is how can I approach the insurance company about claiming for alternative accommodation when:
1. I haven’t told them we’ve had to live in my second home (fearing they would relax even more!)
2. No repair work has yet started
3. The alternative accommodation is also my property albeit me losing out on rental income as a consequence?

What’s the right way to do this for the best chance of success?

I would have thought first read your insurance policy to check if there are any procedures you must follow when making a claim. Then be fully open with the insurance company.

I would not be surprised if you should have first told the insurance company before agreeing (or if that was not practical as soon as possible thereafter) to incur any costs.

I would also have thought you should, if required, aim to demonstrate that moving to your own alternative accommodation was a more cost effective solution than any reasonable alternative.

If you are not happy with any response then complain.

Bogalot

It is a second home or an investment property/ buy to let? Do you have evidence of marketing the property to let, landlords insurance etc?

If you have a BTL mortgage on it, you should have notified the lender you are living there. It's likely you are in breach of your contract.

Shoodie

naedanger wrote: »

I would not be surprised if you should have first told the insurance company before agreeing (or if that was not practical as soon as possible thereafter) to incur any costs.

Agreed. So let's say that's water under the bridge. I'm still losing out the longer I stay here. So if I notify them now would it be reasonable to expect them to cover my loss at least from this point forward?

Shoodie

Bogalot wrote: »

It is a second home or an investment property/ buy to let? Do you have evidence of marketing the property to let, landlords insurance etc?

If you have a BTL mortgage on it, you should have notified the lender you are living there. It's likely you are in breach of your contract.

Yes it is buy-to-let but no marketing was done as the property was being updated to make it suitable to let. The only thing done was a rental evaluation. The property is now rent-worthy and has been for a while hence I'm missing out.

Fosterdog

The problem you may have is that a rental property is classed as a business unless your home insurance covers business losses you probably won't have a claim for lost rent, especially when there wasn't even a tenant in there, you may have advertised it and not got a tenant in for another year.

I wouldn't be 100% sure that you even "had" to move out, most people don't have an empty second home they can just move in to so just have to live in the house while work is done around them, yes it is messy and inconvienient but thousands of people live like that every day. If it really was a health risk to stay there the insurance company would have arranged alternative accommodation for you. Did you speak to them about your plan to move in to your second home and discuss costs with them first or did you just go ahead and move yourself and now want to claim for it?

naedanger

Shoodie wrote: »

Agreed. So let's say that's water under the bridge. I'm still losing out the longer I stay here. So if I notify them now would it be reasonable to expect them to cover my loss at least from this point forward?

I don't see why not provided you show that (1) it was/ is necessary to move out, (2) what you are "charging" is not above the market rate and (3) the rental property is reasonable in comparison to the insured property and alternative accommodation.

Basically try to show them that you are being reasonable from their point of view as well as their own. Ideally you want them to realise if you don't use your own rental property they will be obliged to pay more for accommodation elsewhere. They may also be concerned you are trying to profit from the situation so be prepared to put their mind at rest on that point.

If they can come up with a cheaper alternative (that is reasonable in terms of the policy's cover) then either accept that alternative or, if you prefer, try and negotiate to get to stay in your own property for what the cheaper alternative would have cost them.

If they agree to cover your rental going forward I would then consider raising with them the position of the costs you have already incurred.

PS Another point to consider is the tax position. If the rental property is owned directly by you then I am not sure you would be obliged to pay tax on the amount the insurer pays. If that is the position then I would expect the insurer to only agree to pay what you would have received net, were you to have rented out the property. However I would expect the insurer to know more about that and raise the point themselves.