As the name suggests, alternative accommodation insurance covers the cost of staying somewhere in the event your property suddenly becomes uninhabitable – for instance through fire, storm damage or flooding.
Nowadays we frequently see headline TV news showing low-lying cities, towns and villages hit by floods. While some people may be able to keep the rising water levels at bay, those in the worst affected areas will be forced to leave their homes and find temporary accommodation. Those without alternative accommodation cover - will have to find somewhere to live and pick up the bill themselves.
Your buildings insurance policy will cover repairs or rebuilding costs to your property, but it might not include alternative accommodation costs - not all policies do, so you will need to check the terms of your existing policy.
If it is not included and you want greater peace of mind, then you have the option to add it separately – paying an additional premium to do so. Given that serious damage due to flood, fire or storms can result in your home being out of bounds for many months, alternative accommodation cover certainly has its benefits. The costs of 6 months or more in a rental property on top of your ongoing mortgage payments could be crippling. If these costs are prohibitive, you may be forced to move in temporarily with relatives which may be a somewhat cramped and less-than-ideal arrangement!
An independent loss adjuster will be sent to your home to assess the damage and to what extent your living conditions have been affected.
They will thoroughly check the property and report their findings back to your insurer.
Defining uninhabitable conditions is not always simple and definitions can vary sometimes between individual insurers. But there are usually essential elements that the loss adjuster will look for when determining whether a property is fit to live in. These are:
If the structure has been damaged to such an extent that it is dangerous to live in
There is no running water
The heating does not work – this is especially pertinent in the winter
There is no electricity supply
There is subsidence affecting the building
The property has been seriously vandalised
Sanitary facilities, such as toilets, showers or baths do not work
The loss adjuster may report that the home needs repairs but that it is safe to live in since all the essentials – plumbing/heating etc are functioning. This might not seem ideal but then it might be better to be at home and in a position to monitor repair work than be relocated elsewhere.
If the decision is that your property is unfit to be lived in, the insurer will ask you to move out for a period of time while essential work is carried out.
Alternative accommodation policies are expected to offer you a like-for-like property. So if you have a 1-bed apartment close to the centre of town; the insurer will try and offer something similar. If your present home is a 4-bed, semi-detached house near the local school where your children attend; the insurer will endeavour to provide the same type of property in the same area.
Ideally, the alternative accommodation should factor in your daily commute and getting your kids to school each day. If a town is particularly damaged by, for instance flooding, it may be difficult for the insurer to find similar accommodation within that locality. If you have to live outside your local area making travel to school and commuting more difficult (and expensive) the additional transport costs should be reimbursed to you by the insurer.
It may not always be possible or appropriate to immediately provide a similar replacement accommodation in the same area. In such instances, the insurer may ask you to move for a short period into a hotel or bed and breakfast instead. During this period, the insurer will specify what budget is available to spend on hotel and guest house accommodation.
If you are only expected to be out of your property for a matter of days or weeks, the insurer is far more likely to pay for you to stay in a hotel or B&B as it would make little sense to set up a rental agreement on a property for such a short period. If there is lengthy rebuilding work on your property, then a rental property makes more sense as months in a hotel would not be ideal.
The amounts paid by the insurer will vary depending on the terms of the policy. There’s usually a maximum you can claim for alternative accommodation costs, so it is important to understand what this is when you take out this policy and that you are happy with the cover offered. Some policies stipulate a time limit where payment will cease, so you need to check what this limit is assuming one is specified.
In general, you should expect cover for approximately 20% of the sum insured towards alternative accommodation costs – but check your policy.
Staying in a hotel or B&B for a few weeks while repairs are completed is all very well but what if you have a pet dog or cat? Your temporary accommodation may be ideally located for school and work but it may not accept pets. Some alternative accommodation insurance policies will cover kennel or cattery costs – once again check the terms.
It is not just your pets that might prove difficult to find a temporary home for. If you are in a B&B or hotel for weeks or a month, you might want to put some of your larger belongings into storage – check to see if storage costs are included in your policy.
Most insurers will liaise with you from the start and provide assistance in sourcing approved tradesmen to repair or rebuild your property. A clear understanding of the work required and the timescale in which it can be completed makes it easier to define how long you will need to be in temporary accommodation.
Your insurer should be your first point of contact as soon as you realise your property is unfit to live in. If you move into temporary accommodation or hire builders to begin repair work without notifying your insurance provider, you could invalidate your claim. Typically, your insurance provider needs to approve not just your temporary accommodation, but all the tradespeople needed to carry out your property repairs – so builders, plumbers, electricians etc.
Alternative accommodation cover might be included within your building insurance, but it may not be included in your contents insurance policy. Contents insurance is designed to cover loss or damage to any of your belongings – so might be well worth having to run alongside building and alternative accommodation insurance so that you are covered for all eventualities.
What if you own a property that you rent out to tenants or holidaymakers? Does your landlord insurance cover alternative accommodation? It may or it may not, depending on the policy. Your tenancy agreement might state that you are obliged to provide alternative accommodation for tenants in the event that the property is deemed uninhabitable. If so, then you must satisfy this commitment, but if you do not have alternative accommodation cover, you will have to foot the bill yourself. Given that you might have more than one tenant, this could prove incredibly costly.
It is not compulsory for landlords to provide alternative accommodation. If it is not stated in the tenancy agreement – then there is no obligation to rehouse a tenant. However, as a landlord you will lose rental income if the property is classed as uninhabitable.
As a landlord you might decide to take out loss of rent protection as part of a landlord insurance policy and/or alternative accommodation cover if you have included this commitment to tenants within their lease agreement.
Whether you are a homeowner or a landlord with multiple tenants, it pays to be well insured. But there is also the question of affordability. In an ideal world you would be covered for every eventuality but sometimes this is just not possible. But by shopping around you should be able to find the best cover to suit your circumstances and with premiums that are within your budget.
The alternative accommodation offered to you under your insurance policy might be just the job but what if when you return to your home the repairs or rebuilding aren’t up to scratch?
In the event that you are dissatisfied with the work carried out, you can make a formal complaint to the Financial Ombudsman Service. According to the Ombudsman common complaints include:
The insurer has arranged the repairs but they haven’t fixed the damage
The repairs carried out caused additional damage
The insurer says they can repair the damage but the customer thinks the item should be replaced
The insurer offered the customer a replacement but it’s not the same as the lost or damaged item
The insurer offered the customer money but it wasn’t enough to complete the repairs or replace what was damaged
The customer isn’t satisfied with the quality of work carried out by the builder that the insurer appointed
The Financial Ombudsman will check the policy wording that applied at the time the damage occurred and consider what impact that has on the way the claim can be settled. The aim is to put the policyholder back in a similar position to the one they were in just before the loss or damage happened.