Ordinary houses, extraordinary cover

Whoever they are, wherever they live, some leaseholders are having to pay high premiums to insure their property against terrorist attacks. Melanie Bien reports

The devastating attacks on the British consulate in Istanbul last week served as a worrying reminder that terrorism remains a serious threat. But should we be worried enough to take out specialist cover to safeguard our own homes?

The Association of British Insurers (ABI) doesn't believe that terrorism insurance, which is very expensive, is necessary for residential properties. Yet more and more leaseholders are being forced to pay for it by their freeholder.

Damage as a result of fire and explosion is covered on most domestic insurance policies, says Malcolm Tarling at the ABI. So taking out extra cover shouldn't be necessary.

Yet some flat owners, myself included, are having to pay an extra premium for terrorism insurance. The managing agent of the block of flats in which I live, in Stepney Green, east London, started charging us for the cover this year.

At £1,110 per annum it isn't cheap, but the landlord insists it is a "legal requirement" to have all-risks cover. In my case, I'm even paying for insurance against nuclear, chemical and biological attacks.

"In everyone's lease is a clause which says that the landlord is under an obligation to insure the building against all reasonable perils at that time," says Nick Selmes at Arundel Property Management, my managing agent. "We wouldn't be covered if the building was blown up and we didn't have this insurance."

But Mr Tarling says: "There is no legal requirement that anyone has to have this cover. It might be a contractual requirement by some mortgage lenders but it certainly isn't a legal one."

Mr Selmes also argues that some lenders insist borrowers take out terrorism cover as part of their buildings insurance - and if they don't have this, they can't get a home loan.

"Some mortgage companies lend on the condition that you have this cover," he says. "They check the terms and specifications of your insurance policy. And if only one person living in the building has that requirement on their mortgage, they all need to be covered."

But the Council of Mortgage Lenders - the trade association which represents 98 per cent of the UK market - has no knowledge of such a requirement. "Most policies are fairly standard and I am not aware that any mortgage lenders state specifically that terrorism insurance is required," says a spokesman.

This view is backed up by the Halifax, the biggest mortgage lender in the UK. Spokesman Mark Hemingway says it isn't the bank's policy to demand terrorism insurance and he knows of no plans for this to change.

"We are certainly not insisting that borrowers have terrorism cover, and we have not heard of any moves in the industry to make this compulsory," he adds.

While my own flat is in London, and the capital is a more likely target for bombers, that doesn't seem to be the main reason behind the need for terrorism insurance. Some 26 elderly residents on a specially managed estate in Havant, Hampshire, have been charged £174 for the cover. The managing agent of the development they live in has defended this, saying it is standard practice for the firm.

While it has long been common for companies to take out terrorism insurance, historically this isn't the case for small residential properties.

And even though the ABI believes most insurance policies do cover you against fire and explosion, and therefore terrorist damage, you cannot assume this is the case. In fact, policies differ widely from insurer to insurer, so it is important to check the small print to see whether you have the basic cover in such an event.

"Our standard policies, which cover terrorism damage as a result of fire and explosion, are enough for most people's needs," says Gill Murphy at insurer Direct Line. "At the end of the day it is up to the individual whether they want to go elsewhere for more extensive terrorism cover, but I am afraid we don't offer it. And I would imagine it would be very expensive anyway."

Esure, another home insurer, doesn't offer any type of terrorism insurance, either. And while Churchill will cover you if your home is burnt to the ground as a result of a terrorist attack - because fire will be among the hazards specified - it won't do so if a chemical attack causes damage as this is not in the wording of the policy.

If you live in a block of flats or development administered by a managing agent, you may find you can't escape paying terrorism insurance. But push your agent to hunt for the best deal and to get quotes from other insurers when the policy comes up for renewal.

And unless it is stated in the lease that such terrorism cover is essential, dispute whether you really need to pay for it.