Warning To All Care Home Owners

ARE YOU CONSIDERING REFINANCING?……BEWARE!

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Increasingly we are finding that certain banks are imposing draconian measures when providing finance for your business. Since the bank bailout in 2008 they are passing on more and more risk to the customer or the insurers. Depending on the ratio of loan to equity they may insist on one or more of the following conditions:

• Being noted as an interested party
• Being the ‘first loss’ payee
• Being the ‘co-insured’
• Being noted as a ‘composite insured’

The first of these is common and presents no problems however the others are more extreme and may cause your policy to be cancelled. Many insurers will not entertain applying such conditions as, in effect, they mean that the insurer will be dealing with the lender when there is a claim. This could mean that you, as the policyholder, has little or no influence on how the claim is settled and, in some circumstances, the bank can decide to use the money against the balance on the loan before attending to the actual damage to your care home! Your bargaining position with the insurer on larger claims is compromised.

The market for insurance in the care sector is already small and, whilst Quality Care has a panel of insurers to consult unlike many brokers, with only a tiny percentage of companies willing to take on some of these stringent conditions your choice is restricted. This inevitably results in more cost to you. This is wholly unfair and flies in the face of the basic mantra of the Financial Conduct Authority which sets out to ensure customers are treated fairly.

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ASK THE QUESTIONS BEFORE YOU SIGN!

It goes without saying you should read the small print before signing up for loans from banks and mortgage companies but we have been told by customers they were unaware of these terms during the negotiating period. Once you sign you are stuck with the conditions and this could be just the start of your problems. We have witnessed clients having to spend 200% more in premiums simply because they took on a loan with these conditions and had to then insure with a less competitive company or insure the buildings separately from the care liabilities with an insurer who would accept the terms. This is all you need when you are needing money say to help you compete in a tough conditions! So:

• Please ask the lender whether any such conditions will apply to their loan. If you are in any doubt call us before you sign up and we can discuss any disadvantages financial or otherwise with you so you can then make an informed decision. In most cases there WILL be some sort of financial penalty involved.
• Be prepared to look at alternatives as, although the interest on the loan may be favourable with one bank, this might be more than negated by the increased cost of the insurance quite apart from your hassles you will experience when you make a larger claim.
• Compare other offers as some lenders have no such conditions
• Push back at the lender and ask them to reconsider the more extreme measures and water them down. You will have a better bargaining position than you may think particularly when the loan to equity is lower

At Quality Care we are dedicated to understanding the care sector and want to make sure our customers are not disadvantaged at a time when all are feeling the effects of increased regulation.