Building Insurance for Blocks of Flats: What Leaseholders Should Know

Buildings insurance is usually one of the largest items in a block's service charge. Leaseholders pay for it, so it makes sense to understand who arranges it, what it covers and what information you are entitled to see. This guide covers England and Wales.

Who insures the building?

In most blocks, the lease requires the freeholder, or a resident management company (RMC), to insure the whole building, and leaseholders contribute through the service charge. Where a Right to Manage company has taken over management, insurance arrangements may pass to it, depending on the lease. Leaseholders usually arrange their own contents insurance, and landlords who let their flat may need landlord cover for their own contents and liabilities.

Check your lease for:

• Who must insure, and against which risks
• Whether the building must be insured for its full reinstatement value
• How the premium is shared between flats
• Any obligations on leaseholders, such as notifying the insurer of works to their flat

What a good block policy covers

• The structure of the building, including roofs, walls, foundations and common parts, usually including fixtures inside the flats as defined in the policy
• Insured risks such as fire, storm, flood, escape of water, subsidence and impact
• Property owners' liability, covering claims from people injured in the common parts
• Loss of rent or alternative accommodation if flats become uninhabitable after an insured event
• Cover for lifts, plant and machinery where relevant, often with engineering inspections
• Directors' and officers' cover for RMC and RTM boards, often arranged alongside the main policy

Getting the sum insured right

The sum insured should reflect the cost of rebuilding the building, including demolition, professional fees and compliance with current regulations. This is different from the market value of the flats. A reinstatement cost assessment by a qualified surveyor, reviewed periodically, helps make sure the building is properly protected. Underinsurance can reduce what an insurer pays on a claim, so it is worth keeping up to date.

Your right to information about the policy

Where your service charge includes an insurance contribution, the Schedule to the Landlord and Tenant Act 1985 gives you useful rights:

• You can ask the landlord in writing for a written summary of the insurance, showing the sums insured, the insurer and the risks covered. The landlord must respond within 21 days of receiving the request, and may instead provide a copy of the policy.
• You can ask to inspect the policy and evidence of payment of the premium, and to take copies, within the same 21-day timescale.
• You can notify the insurer of a possible claim yourself, where you believe damage covered by the policy has occurred.

Commissions and transparency

Insurance for multi-occupancy buildings has received close attention from regulators. Under rules set by the Financial Conduct Authority (Policy Statement PS23/14), insurers and brokers must treat leaseholders as customers, provide them with information about the policy and its pricing, and disclose the commission and other remuneration paid, including any paid to freeholders or managing agents.

The government has also said it will introduce new rules to stop leaseholders being charged unfair or hidden insurance commissions, and the Leasehold and Freehold Reform Act 2024 provides for changes to what can be recovered for insurance. Check current commencement before relying on any new rule.

At Westbridge we keep it simple: our service is commission-free, we review the cover and renewal terms with the board each year, and we share the details openly with directors and leaseholders.

Insurance and building safety

Insurers look closely at fire safety, external walls, maintenance and claims history when they price a block policy. Good records help at renewal: a current fire risk assessment with its actions completed, up-to-date electrical and lift inspection reports, evidence of planned maintenance, and clear information about the construction of the external walls. Buildings with well-documented safety and maintenance are in a stronger position to secure competitive terms.

Questions to ask at renewal

• Has the sum insured been checked against a recent reinstatement cost assessment?
• Have the excesses changed, including any higher excess for escape of water?
• Are there any new exclusions or conditions, for example on unoccupied flats or on works?
• How many insurers were approached, and how do the quotes compare?
• What commission or other remuneration is being paid, and to whom?
• Does the policy include cover for terrorism, lifts and plant, and directors and officers, where the building needs it?

Making a claim

• Report the damage promptly to the managing agent, with photos
• Prevent further damage where it is safe to do so, such as isolating a leak
• The managing agent notifies the insurer, arranges any loss adjuster visit and coordinates repairs
• Check how the excess is dealt with under the lease and the policy
• Repairs are carried out by an appropriate independent contractor and checked before payment

Escape-of-water claims are among the most common in blocks of flats. Our guide to damp, mould and leaks explains how leaks between flats are usually handled.

A checklist for directors

• Confirm who insures under the lease and what the lease requires
• Keep a current reinstatement cost assessment
• Review the cover, excesses and exclusions each year before renewal
• Ask for full disclosure of commissions and remuneration
• Share the policy summary with leaseholders
• Keep a log of claims and the repairs that followed

If you would like a fresh look at your block's insurance arrangements as part of a wider management review, contact us for a free building review.