Buildings insurance renewal: what resident directors and freeholders should check
For most blocks of flats, buildings insurance is one of the largest lines in the service charge budget. It is also one of the easiest to roll over without scrutiny. A renewal that goes unchecked can leave a building underinsured, paying for cover it does not need, or unable to explain the premium when leaseholders ask.
Whether you are a resident director, an RTM company or a freeholder, these are the checks worth making before your next renewal.
1. Check the reinstatement valuation
The sum insured should reflect the cost of rebuilding the building, not its market value. Build costs have risen sharply in recent years, so a valuation that was accurate three years ago may now be well short.
Find the date of the last reinstatement cost assessment.
As a rule of thumb, commission a full assessment every three years, with index-linked updates in between. Commission one sooner after major works or changes to the building.
Remember that underinsurance does not just affect a total loss. Many policies apply "average", which reduces every claim in proportion to the shortfall.
2. Confirm what the policy actually covers
Read the schedule, not just the premium. Check the cover for:
escape of water and trace-and-access, which are often the most frequent claims in blocks;
subsidence, storm and flood, and any exclusions tied to the building's history;
terrorism cover, if the lease or lender requires it;
property owners' liability, and directors' and officers' cover for RTM and RMC boards;
any engineering inspection cover for lifts and communal plant, and whether it matches the inspections you already have in place.
3. Review excesses and the claims history
High excesses can make a policy look cheaper while pushing more costs back onto the service charge. Check the standard excess, any higher excess for escape of water, and how excesses are handled in the budget.
Look at the claims history too. A pattern of repeat leaks or water ingress usually points to a maintenance issue. Fixing it at the source is often cheaper than paying rising premiums and excesses year after year.
4. Ask about commission and fees
Leaseholders are entitled to understand what they are paying for. FCA rules for multi-occupancy buildings insurance require brokers and insurers to act in leaseholders' interests and to be open about the commission and fees included in the premium.
Ask your broker for a clear breakdown of the premium, the commission, and any fees paid to the broker or managing agent. For more detail, see our guide to insurance commissions.
5. Have your building safety information ready
Insurers increasingly ask about fire safety before they will quote. Have your current fire risk assessment, fire door and alarm servicing records, and any information on external walls and remediation ready. Gaps here can lead to higher premiums, extra conditions or reduced cover, especially for taller buildings within the Building Safety Act regime.
6. Line renewal up with the budget
Insurance renewal and service charge budgeting should not happen in isolation. Where you can, get renewal terms early enough to put a realistic figure in next year's budget. Explain any significant increase to leaseholders when you issue demands. Leaseholders can also ask for a summary of the insurance cover, so it is worth having one ready.
Frequently asked questions
How often should a block have a reinstatement cost assessment?
A full assessment every three years is common practice, with index-linked updates in the years between. Get one sooner after major works or alterations.
What happens if a building is underinsured?
The insurer may reduce each claim in proportion to the shortfall, so even small claims can pay out less than expected.
Can leaseholders see details of the buildings insurance?
Yes. Leaseholders can ask for a summary of the cover, and brokers should be able to explain the commission and fees within the premium.
Talk to Temphis
If your renewal is coming up and you would like a second pair of eyes on the cover, the valuation or the costs, contact the Temphis team to see how we can support you and your building.