Arranging adequate buildings insurance for residential blocks and shared properties involves considerably more complexity than a standard home insurance policy, and specialist property managers like Taylor & Martin provide expert guidance to help freeholders, residents’ associations, and landlords secure the right level of cover for their buildings. Getting the specification and the sum insured right from the outset is essential to avoid underinsurance and ensure that any claim can be settled in full.
What Buildings Insurance for a Residential Block Covers
Buildings insurance for a residential block typically covers the cost of repairing or rebuilding the structure following damage caused by fire, flooding, subsidence, storm, impact, and a range of other insured perils. The policy should cover the full reinstatement value of the building, including all communal areas, the roof, foundations, external walls, internal walls, fitted fixtures and fittings, and any outbuildings or boundary structures that form part of the insured premises. Many block policies also include public liability cover, which protects the policyholder against claims arising from injury or property damage suffered by third parties on the premises. Engineering inspection and machinery breakdown cover for lifts and other communal mechanical equipment may also be included depending on the policy terms.
The Importance of an Accurate Reinstatement Valuation
One of the most critical elements of any buildings insurance arrangement is ensuring that the sum insured accurately reflects the true cost of reinstating the building from scratch. Underinsurance occurs when the sum insured is lower than the actual reinstatement cost. In the event of a significant claim, the insurer may apply a proportional reduction to the settlement, leaving the policyholder responsible for a substantial shortfall. The reinstatement value is not the same as the property’s market value and should be calculated by a qualified building surveyor using current construction cost data. Most insurers recommend that a formal reinstatement cost assessment is carried out at least every three years, or whenever significant alterations are made to the building.
Who Is Responsible for Arranging Block Buildings Insurance
In a leasehold building, the responsibility for arranging buildings insurance typically sits with the freeholder or the management company appointed to manage the building on behalf of the leaseholders. The terms of individual leases usually contain specific provisions regarding insurance obligations, and leaseholders are entitled to request evidence that adequate insurance is in place and that their leasehold interest is noted on the policy. Where a residents’ management company has been formed, the directors of that company collectively assume the insurance responsibility. In commonhold developments, the commonhold association is responsible for arranging the insurance for the common parts, while individual unit holders are responsible for insuring their own units.
Common Claims in Block Buildings Insurance
The most frequent claims on block buildings insurance policies relate to escape of water, which can cause extensive damage across multiple flats when a pipe bursts or an appliance fails on an upper floor. Fire claims, while less frequent, tend to be the most financially significant and can result in the complete loss of a building where the fire spreads before it is brought under control. Subsidence claims are more common in areas with certain soil types, particularly in drier years when the ground shrinks, and settlement occurs. Accidental damage and malicious damage claims are also relatively common in larger residential blocks, particularly in communal areas accessible to a wide range of residents and visitors.
The Role of a Managing Agent in Buildings Insurance
A professional managing agent can add significant value to the building’s insurance process by ensuring that cover is placed with a reputable insurer on terms appropriate to the specific building, that the sum insured is reviewed regularly, and that claims are handled efficiently when they arise. Managing agents with specialist expertise in residential block management will often have access to schemes and facilities that are not available to individual freeholders or residents associations acting on their own, potentially delivering both better cover and more competitive premium levels. The managing agent should maintain comprehensive records of the building, including maintenance history and any remedial works carried out, which can support claims handling and renewal negotiations.
Key Questions to Ask When Reviewing Block Buildings Insurance
When reviewing an existing block buildings insurance policy or seeking new cover, there are several important questions worth addressing. Is the current sum insured based on a recent professional reinstatement cost assessment, or has it simply been index-linked from an original figure that may never have been accurate? Does the policy include all relevant covers for the specific building, including public liability, loss of rent or alternative accommodation costs, and engineering inspection? Is the policy placed with an insurer that has a strong track record of paying claims fairly and promptly? Are all leaseholders aware that the block insurance is in place and do they understand what it covers and what they need to arrange separately for the contents of their own flats?
David Prior
David Prior is the editor of Today News, responsible for the overall editorial strategy. He is an NCTJ-qualified journalist with over 20 years’ experience, and is also editor of the award-winning hyperlocal news title Altrincham Today. His LinkedIn profile is here.
