10 Questions every leaseholder should ask about building insurance

Our aim here is straightforward, which is to help directors feel confident in their responsibilities and leaseholders feel reassured about how their building is protected.

How you pay for your insurance

If you live in a flat, you contribute towards the building insurance through your service charge.

For many leaseholders, that cost appears once a year in the budget and is rarely revisited. For RMC and RTM Directors, arranging the policy can feel like a significant responsibility, particularly when you’re volunteering your time and balancing competing priorities.

Insurance can seem technical, but understanding the fundamentals makes a real difference. Clear knowledge reduces risk, builds trust between management company directors and residents, and ensures the building is properly protected.

Here are ten questions worth asking, whether you are a leaseholder wanting reassurance, or a director overseeing the policy.

1. Does the policy comply with the lease?

Most leases include insurance requirements, and the policy needs to match those obligations. If the policy does not meet what the lease requires, it can cause issues when a claim is made or when a flat is sold and solicitors start asking questions.

Lease wording can specify how the building must be insured, the risks that must be covered, and whether lenders’ interests should be noted. It can also describe who is responsible for arranging the policy, which matters in RTM and resident-led blocks.

Rob Mayo, Insurety – Expert Insight:

Perhaps the most common issue we see is where insurance policies are purchased based upon price alone especially where a more general insurance broker is used to procure terms.

It is a requirement contained within most Leases that the insurance arranged must “provide indemnity for all common perils”. Some Leases do go as far as to list these perils and others do not which leaves a rather large grey area.

Directors should only engage with specialist brokers that understand the complexities of the Leasehold system fully and are able to provide bespoke products tailored specifically for Blocks of Flats – By doing this, Directors and Leaseholders alike are assured of being covered sufficiently

2. What is the reinstatement value and when was it last reviewed?

The reinstatement value is the cost to rebuild the block from scratch, including demolition, removal of debris, and professional fees. It is not the market value.

If the declared reinstatement value is too low, insurers may reduce claim payouts under “average” provisions. If it’s too high, leaseholders may be paying more than necessary. A professional reinstatement valuation, reviewed at sensible intervals, helps ensure the figure remains accurate, particularly with construction costs changing over time.

Rob Mayo, Insurety – Expert Insight:

It is a basic expectation from all insurers to have an up to date Buildings Declared Value (BDV) with all new quote requests. This information is a key material fact which insurers will use to base their pricing upon.

A DV that is too low could result in a policy Average Condition being applied at the point of a claim. The condition of Average means that the insurer will only pay the proportion of a claim that they are deemed to be covering. As an example if the property is valued at £1M and it is insured for £800,000, the insurer would only pay a maximum of 80% of a claim leaving Leaseholders to find the shortfall.

RCA’s should be conducted every 3 years as a minimum. We would recommend for more complex sites that a review of the RCA is conducted every 18 months with a full review on every third year.

3. What exactly is covered, and where are the gaps?

A common assumption is that “building insurance covers everything”. In reality, policies vary and the detail matters.

The schedule will usually confirm the core risks covered (such as fire, storm, flood and escape of water) as well as optional or variable areas like accidental damage, subsidence, underground services and alternative accommodation. It may also include cover for communal contents, which is often overlooked until an incident occurs.

If residents are unclear on what the policy covers, expectations can quickly become misaligned during a claim. A short annual summary to leaseholders can prevent confusion and disputes later.

4. What are the excesses and how are they applied?

Excesses are one of the most frequent flashpoints in blocks, particularly with escape of water. The excess for water claims can be much higher than the “standard” excess, and it’s important that directors and residents understand this before an incident occurs.

It’s also worth clarifying how the excess is dealt with in practice. In some cases, the service charge covers it. In others, where damage originates from a specific flat, the lease may allow the cost to be recovered from that leaseholder. Having a clear approach, supported by the lease and explained calmly, makes a difficult situation easier for everyone.

5. Does the policy include Directors & Officers (D&O) insurance?

For RMC and RTM companies, D&O insurance is a key consideration. Directors are making decisions about contracts, budgets, safety works and compliance. If those decisions are later challenged, it can create stress and financial exposure for individuals.

D&O insurance can provide protection for directors acting in good faith as part of their role. It is not a replacement for good governance, but it can be an important safeguard for volunteers who are trying to do the right thing.

Rob Mayo, Insurety – Expert Insight:

D&O Insurance is a vital policy for RMC/RTM Directors as it not only provides protection against Corporate Liabilities but also Directors own personal Liabilities. Careful consideration should be given to the appropriate levels of cover required – your broker should be able to provide sound advice on this front.

6. What is the claims history of the building?

Claims history affects premiums and insurer appetite. Multiple claims, particularly repeat escape of water incidents, can lead to higher excesses, restricted cover, or more challenging renewals.

Directors should understand what has happened historically and what steps have been taken to reduce repeat risks. Leaseholders benefit from transparency too, especially when premiums rise. Good communication here helps residents see the “why”, rather than assuming it’s arbitrary.

Rob Mayo, Insurety – Expert Insight:

The claims history of a risk demonstrates the costs to insurers over a 5 year period that has been paid out in claims. All insurers will want to understand these numbers before they are willing to provide quotes.

Insurers will look at the cost of claims but also the frequency of those claims (how often they are occurring). It is also likely that for any particularly large claims, insurer will expect significant amounts of information regarding the cause, subsequent remediation and any potential wider building remediation to ensure another large claim doesn’t occur.

7. Is terrorism cover included or required?

Some leases require terrorism insurance. Others do not mention it.

Even where it is not stated in the lease, terrorism cover may still be worth considering because standard building policies often exclude terrorism-related damage. If a serious incident occurred and the block wasn’t insured for it, the cost of reinstatement could be substantial and could ultimately fall back to the management company and leaseholders.

There are also lending considerations. Some mortgage lenders expect terrorism cover, particularly in city centres or areas near transport hubs. It can occasionally become a conveyancing query during a sale, even if it is not a lease requirement.

Premiums for terrorism cover are often modest compared with the potential impact of being uninsured. For many management company directors, it’s a straightforward risk assessment decision – low likelihood but high consequence.

Rob Mayo, Insurety – Expert Insight:

Care needs to be taken when looking at Terrorism insurance. Some policies will only accept liability when there is physical damage to a property as a result of a Terrorist incident. In reality. the major risk to blocks is denial of access in the event of an incident in the vicinity of the block.

It is important to be guided through the different levels of cover available so that a choice can be made that best fits with the developments requirements/risks.

8. Is public liability insurance included, and is the limit appropriate?

Public liability insurance is one of the most important protections for any residential block. It covers the legal liability of the insured party (often the freeholder, RMC or RTM company) if a third party is injured or their property is damaged due to something connected to the building.

Examples can include a slip or trip in a communal hallway, a loose paving slab, a falling tile, or an incident linked to contractors working on site. Even with good maintenance, accidents happen. Without adequate public liability cover, the financial exposure for the company and leaseholders can be serious.

It’s worth checking that public liability is included, who the “insured” parties are, and whether the limit of indemnity is suitable for the building type and size.

Rob Mayo, Insurety – Expert Insight:

Explain typical public liability limits for residential blocks and common pitfalls around “who is insured”.

Public Liability should be included within all buildings policies. A standard limit when a block is insured would be £10M and £5M where cover is required for Communal grounds only. Anything below £5M is really too low in my opinion.

PL cover provides indemnity for third party property or bodily injury from occurring whilst within the boundary of the insured property.

9. Are leaseholders responsible for their own contents and internal improvements?

The block policy usually covers the structure and communal parts of the building. Leaseholders generally need their own contents insurance for belongings, decorations, and internal items.

Where it becomes more complex is when residents have upgraded kitchens, bathrooms or flooring. Some block policies provide limited cover for internal improvements, while others do not. Clear advice helps leaseholders understand what they need to insure personally, and reduces disappointment if a claim occurs.

10. How is the policy reviewed each year, and how are claims handled in practice?

Good governance involves more than accepting a renewal figure. Directors should understand how the policy is reviewed, how information about the building is updated, and how much time is allowed for proper consideration before renewal.

It’s equally important to know how claims are handled. Who notifies the insurer? Who liaises with loss adjusters? How are residents updated? A calm, organised claims process protects outcomes and helps residents feel supported during stressful situations.

Rob Mayo, Insurety – Expert Insight:

Explain how broker support helps during renewals and complex claims, and what “good” looks like in practice.

This is an area that many brokers can become complacent in – A good broker should be approaching the market in plenty of time every year ahead of renewal. This approach tests the pricing and cover being offered by the current insurer, If unsatisfactory a new insurer should be recommended.

You should receive your renewal terms no less than 30 days prior to the renewal date.

A shared responsibility

Building insurance protects the structure, the financial stability of the block, and the individuals serving as directors. It underpins mortgage lending, supports compliance with lease obligations and provides reassurance to residents.

For leaseholders, asking informed questions promotes transparency. For RMC and RTM Directors, structured review and professional advice reduce risk and strengthen governance.

Insurance should feel understood and properly overseen. Taking time to explore these ten areas helps ensure the cover in place genuinely supports both the building and the community within it.

Jodie Fraser, BA (Hons) FTPI AssocRICS FIoL, Managing Director, JMJ Asset Management