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Many people are living with worthless home insurance because they or someone - such as a tenant or lodger - living in their property has an unspent conviction, experts warn.
Householders risk losing thousands of pounds in rejected claims because they do not realise they need to declare even the most minor conviction of anyone in their household.
"It's only when loss adjusters start to ask questions that people realise they have a problem," says Peter Fairweather of Anchor Underwriting, which specialises in insuring people with convictions. "We had a case where grandparents took their grandson in to live with them and had a major electrical fire which caused serious damage. Only when the insurers started investigating did the couple find out the young man had a conviction and that their insurance was void."
Some 7.3 million people in the UK, a quarter of the working population, have a conviction, according to Ministry of Justice figures. But, as the law stands, it is the responsibility of the person taking out insurance to volunteer information about a conviction or any other "material fact" that may affect their cover.
Most convictions - including small fines - remain unspent (which means that they have to be declared) for at least five years.
Chris Bath, of Unlock, the National Association of Reformed Offenders, says questions about convictions are often not asked explicitly by insurers and that the courts are failing to warn offenders about the effect a conviction can have on insurance.
"On insurance websites in particular, people can often simply tick a box saying they accept assumptions made about them - including that they have no convictions - without really understanding what they are agreeing to," he says. "The courts don't tell offenders that their conviction might affect insurance, so many people have no idea that not mentioning an offence matters."
A brief survey by Cash of insurance websites reveals a very uneven picture Some, such as Confused.com, esure and More Th>n offer clear information which pops up automatically early in the application process. Others bury questions about convictions in a page accessed by clicking a tiny "assumptions we make about you" button, easily passed over by simply ticking a box. (For a comprehensive guide to the good and the bad, go to guardian.co.uk/money).
Michelle Barber is paying a high price for not telling her insurer about a minor conviction. Her home was wrecked by fire in 2007 and she now faces a bill for more than £240,000 because she failed to mention a £150 fine imposed three years earlier for an overpayment of benefits.
"I hadn't realised such a minor fine counted as a conviction," she says. "I wasn't arrested, the police weren't involved, and I'd simply forgotten about it by the time I took out the insurance."
Norwich Union agreed to rebuild the house and paid out more than £50,000 to cover contents and other costs. In October last year Barber moved back in. But in January she received a letter from the insurer's solicitors demanding all the money back because she had not declared the £150 fine.
"I was shocked and felt sick. Why did no one tell me such a tiny fine could do this? Why didn't the insurance company make it clear what they needed to know when I took the policy out?"
Norwich Union says: "Ms Barber has failed to declare previous convictions although she has had opportunities to do so. Had Ms Barber disclosed her previous fraud conviction we would not have offered her cover." Barber is now taking her case to the Financial Services Ombudsman.
Malcolm Tarling, of the Association of British Insurers, defends the right of insurers to take convictions into account. "Where non-disclosure is relevant to the risk then insurers are justified in declining or withdrawing insurance cover," he says. "But a conviction should only be taken into account where insurers believe it is relevant to the actual risk."
Even those who are reading this thinking that this will never affect them should be wary - specifically if they are one of the thousands who have recently let out their property. Landlords are responsible for telling their insurer about their tenants' convictions as well as their own.
"A landlord must disclose his own unspent convictions and convictions of any tenant," says Nathalie Mifsud of Hamilton Fraser, insurance partner of the National Landlords Association (NLA). "If a tenant with a conviction moves into a property midway through an insurance policy, and the landlord does not inform the insurer, the policy is potentially void."
Two high street letting agents contacted by Cash took very different approaches to checking for convictions.
London agent Foxtons does not carry out any checks for county court judgments or convictions, while letting agent Winkworth takes a more rigorous approach. "We ask tenants if they have a criminal record and check for CCJs," says director Charles Peerles.
Steve Hilton, of the NLA, is concerned that more than 1 million private landlords who manage their own properties are at risk. "I suspect a lot of private landlords are unaware they should be asking for this type of information and it hardly seems reasonable that someone can so easily be in breach of an insurer's terms and conditions," he says.
• Do you think insurers are justified in turning down claims in these circumstances? Have you ever had a claim turned down yourself? Share your views with us by writing to Cash, The Observer, King's Place, 90 York Way, London N1 9GU or email us at cash@observer.co.uk
What they want to know
Certain criminal convictions are "spent" after a rehabilitation period. This varies according to the offence, but most convictions are forgotten after five years. Until they are , you have to declare them to an insurer.
Cash checked with customer services at three major insurers - esure, Directline and Norwich Union - to see what sort of convictions would rule out home cover with them.
All said motoring convictions - speeding, parking fines, and so on - are not relevant to home insurance and do not have to be declared. However, all other unspent convictions must be declared. To double check this we asked each of the three insurers if they would offer us home insurance if we had a fine of £100 for dropping litter received two years ago (as the conviction would then still be "unspent").
Directline and Norwich Union declined to offer any cover whatsoever - they could not consider an application until the five years was up and the conviction became spent. Esure said it would need to be declared and may affect the decision to offer cover.
The good - and the bad
The good
Confused.com, esure.com, Morethan.com
In all cases a clear assumptions page appeared automatically
The bad
Churchill, Direct Line, Endsleigh.co.uk, moneysupermarket.com, Norwich Union
Assumptions buttons buried in small print at bottom of online form OR you need to click on a tiny button to see assumptions list OR assumptions appear automatically but small typeface is very hard to read.
Where to go if you have a conviction:
Insurable: 0845 0779949, nsurable.com
Fresh Start Insurance: 01733 208278, email: johnc@culpeck.co.uk
Anchor Underwriting: 020 3301 3393, email: peter@anchorunderwriting.co.uk
Guildhall Brokers: 020 8446 6307, email: roger@guildhallbrokers.com
Fairplay Insurance: 01424 222082, email: terry@bureauinsure.co.uk
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