The Daily Telegraph - Saturday - Money
The bereaved could also be left uninsured
When a person dies, their home insurance could be cancelled instantly, leaving no cover. finds out what to do
Relatives of the recently deceased are often unaware that their loved one’s home insurers may not pay claims, putting their inheritance at risk, experts warn. This is because home insurance policies can become invalid as soon as a home owner dies or after the house is left empty for a certain period after death.
Grieving relatives can easily overlook this when they take over the deceased’s affairs.
While the situation can be fixed, decisive action is needed, as insurers react in different ways and public awareness of the problem is low.
Surviving family members must take action either immediately or within 30 days to ensure the deceased’s property and possessions are still covered.
Alan Inskip of Tempcover, an insurer, said: “If a home is burgled after the owner dies, for example, the insurer might not pay out.” This could be particularly painful if the items stolen were central to a bereaved person’s inheritance.
Some insurers will maintain cover after death until the policy ends, even if the deceased person was the only person living in the house. However, a possible complication is that banks will cancel any direct debits on death, which could affect the payment of the premium. If the deceased is the main insurance policyholder but the house is not left empty, the remaining spouse must apply to have the policy put into their name.
If the house is left empty, an executor of the will can do the same thing.
Some insurers will allow names to be changed in this way, though you may need to show a death certificate.
Martin Bridges of the British Insurance Brokers’ Association said: “Most insurers are amenable to amending the policy into the name of the executors.”
If the insurers do allow it, this is a quick fix that means the home and contents will continue to be covered.
But if the existing insurer does not allow the name to be changed, or if the deceased policyholder was the only person living in the property, the home insurance is likely to become invalid either immediately or within a month.
This is because, even if the cover does not lapse on death, most home insurance policies stipulate that the house cannot be unoccupied for more than 30 days. Insurers reason that unoccupied homes are at greater risk of burglary, property damage or squatters breaking in.
After any 30-day grace period the home insurance cover could either be declared void entirely or scaled back to exclude certain claims.
Insurers of unoccupied properties may provide only what is known as If a family member has died, you are likely to require probate. Probate is legal permission to execute a will and settle the deceased’s affairs.
Last year the Government increased probate fees for many estates. The new system dropped flat fees and brought in a sliding scale based on the value of the estate.
Estates worth less than £50,000 will pay nothing, but estates worth more than £50,000 will face increased fees.
Citizens Advice and the Money Advice Service (moneyadvice service.org.uk) can give tips on probate, as can HMRC (call 0300 123 1072). “flea” cover: insurance against fire, lightning, explosion and aircraft damage to the home.
James Daley of Fairer Finance, a consumer body, said insurers should act with compassion even if the wording of a policy allowed them to void claims.
He said: “People would be horrified, in the unlikely event that a house catches fire or is burgled in the days after death, for the insurer to turn around and say the policy is not in force because the policyholder is dead.
“If someone died and their house was unoccupied for a month, the insurer might be on slightly firmer ground. But any insurer that did that would have no heart and it would show they didn’t understand the human part of their business.”
If insurance cover is lacking or unavailable, the solution is likely to be a specialist short-term insurance deal.
Mr Bridges said: “There are providers that specialise in these unoccupancy situations.”
These policies can be taken out for as long as needed and give the property the same cover as a normal home insurance policy.
But short-term deals may have some strings attached. For example, the policyholder may have to arrange for regular checks on the property, perhaps as often as every week.
They may also have to keep the home at a certain temperature or turn the water off to prevent damage from leaks.
The UK’s biggest insurer has revealed that income protection and travel insurance are the least likely claims to be paid.
Aviva said 89pc of travel insurance and income protection claims were paid in 2017, compared with the average payout rate across all claims of 96pc.
Motor insurance claims were the most likely to be successful. Aviva paid out in 99.3pc of these cases last year. This total excludes third-party claims, such as personal injury claims for whiplash, of which Aviva rejects one in eight for being fraudulent.
The insurer said income protection claims are most likely to be rejected because customers’ illnesses were not serious enough for the policy to pay out.
Income claims are often turned down because customers do not tell the whole truth about their lifestyles when taking out the policies.
Aviva said the main reason travel claims are turned down is because the issue at stake is not covered by the policy. Travel insurance policies tend to cover basic issues as standard then require the customer to pay more to cover extra risks.
Another common reason for rejecting a travel claim is that a travel delay is not long enough to trigger a payout.
Aviva said it paid out £10m a day in claims in 2017 and that it wanted to challenge the belief of 55pc of consumers that insurers try to avoid paying claims.
Andy Briggs, of Aviva, said this was a myth that could end up being harmful to the industry. “If people have a sense that insurance is not going to pay out, they won’t bother buying it,” he said.
Aviva repaired 120,000 cars a day during 2017, enough to fill the M25 completely. The insurer added that the carpets it replaced last year under home insurance claims would cover 11 football pitches.