Do you advise your client on insurance or do you make it clear that you are not an expert on insurance matters and that the client is better talking to an insurance expert? If you do advise I suspect you make think differently when you read through what follows.
In line with current conveyancing practice if you are instructed by the client to check an insurance policy and you agree to do so there is an obligation on you to check the following issues:
- Is the amount of cover adequate?
- Is the sum index linked?
- Are the risks insured adequate? Cross referencing perhaps to the result of your environmental search result.
- Have all particular features of the property such as a thatched roof been disclosed and are they adequately insured?
- Is the property attached to an adjoining property, if so does the insurance extend to damage to a neighbouring property where practicable?
- Does the policy comply with the buyers lender requirements?
Most leasehold properties are cowered by insurance put into effect by the Freehold owner. The policy still needs however to be checked in the same way. Additionally there may need to be extra cover put into effect to cover damage caused by an uninsured risk. The client may remain liable under the lease including the covenants to repair and pay rent. Some policies do not extend to flats where a resident is claiming social security benefits.
Though the need to check where a lender is not involved is something which I would not offer to do ( I am not an expert in this field ) I would always make sure that where the client is borrowing the client is made aware of the lender requirements for insurance. It would be negligent not to do so.
A lender’s particular requirements, set out in part 2 of the CML handbook, will stipulate:
-whether the buildings insurance policy must be in the joint names of the lender and the owners of the property, or whether it is sufficient for the lender’s interest to just be noted on the policy the maximum excess which is acceptable to the lender
-whether the lender requires written confirmation from the insurance company that they will notify the lender if the policy is not renewed, or is cancelled; and
-whether the lender requires a copy of the buildings insurance policy, and the last premium receipt, to be sent to them
It is also necessary to make the client aware of the need to take care and not to make a misrepresentation to the insurer.
So next time you come to consider insurance as part of the exchange process do keep in mind the above and make a clear decision on whether to take on responsibility for advising or whether to make it clear to the client that the time has come for the client to take advice from an insurance specialist. This is something which you may wish to address and make clear in the terms of your retainer.