Block of Flats Insurance: What Freeholders & Managing Agents Need to Know

What Is Block of Flats Insurance?

Block of flats insurance — sometimes referred to as block buildings insurance — is a single policy that covers the entire structure of a residential block, including all communal areas, shared facilities, and the fabric of individual flats. Unlike standard home insurance, which covers a single dwelling, block insurance is designed to protect the whole building under one arrangement.

This type of policy is typically arranged by the freeholder, a right-to-manage (RTM) company, or a managing agent acting on behalf of the building's owners. The cost is usually recovered from leaseholders through the service charge, as set out in the terms of their lease.

Who Is Responsible for Arranging It?

The responsibility for arranging buildings insurance on a block of flats typically falls on the freeholder. This obligation is usually set out in the lease, which will specify who must insure the building, what risks must be covered, and how the cost is recovered.

In practice, the insurance may be arranged by:

• The freeholder directly, particularly for smaller blocks
• A managing agent appointed by the freeholder to handle day-to-day management
• A right-to-manage (RTM) company, where leaseholders have exercised their right to manage
• A residents' management company (RMC), where leaseholders collectively own the freehold

Regardless of who arranges the policy, the freeholder retains the legal obligation to ensure the building is adequately insured. If a managing agent is appointed, they act on behalf of the freeholder and must ensure the policy meets the requirements set out in the leases.

What Does It Cover?

A comprehensive block of flats insurance policy typically covers the following:

• Buildings insurance — the structure, roof, walls, foundations, and permanent fixtures
• Common areas — hallways, stairwells, lifts, car parks, and shared gardens
• Liability cover — property owners' liability for injuries to visitors or third parties in communal areas (see our <a href="/knowledge-centre/public-liability-tradespeople">public liability guide</a>)
• Loss of rent — if a flat becomes uninhabitable due to an insured event
• Terrorism cover — often required by mortgage lenders, available through Pool Reinsurance
• Engineering inspection — cover for lifts, boilers, and other mechanical equipment

The policy should cover the full reinstatement cost of the building — that is, the cost to completely rebuild the block from scratch, including demolition, site clearance, professional fees, and compliance with current building regulations. This figure is often significantly different from the market value of the building.

Section 20 Consultation Requirements

Under Section 20 of the Landlord and Tenant Act 1985 (as amended by the Commonhold and Leasehold Reform Act 2002), freeholders and managing agents must consult with leaseholders before entering into certain qualifying long-term agreements — and this can include insurance contracts.

A qualifying long-term agreement (QLTA) is any agreement entered into for a period of more than 12 months where any leaseholder's contribution exceeds £100 per year. Since most block insurance policies run annually and are renewed each year, they may not always trigger Section 20. However, if you enter into a long-term agreement with a broker or insurer (for example, a three-year deal), Section 20 consultation is likely required.

The consultation process involves three stages: a notice of intention, a period for leaseholders to nominate alternative providers, and a notice summarising the proposals received. Failure to follow this process can result in the leaseholder's contribution being capped at £100 per year, regardless of the actual cost.

Common Issues and Pitfalls

Managing block of flats insurance is not without its challenges. Some of the most common issues include:

Underinsurance. If the declared reinstatement value is too low, the insurer may apply average — meaning they will only pay a proportionate share of any claim. For example, if the building is insured for £2 million but the true reinstatement cost is £4 million, the insurer may only pay 50% of a claim.

Excessive commissions. The Leasehold Reform (Ground Rent) Act 2022 and ongoing regulatory scrutiny have highlighted concerns about excessive commissions charged on block insurance. Leaseholders have the right to request a summary of the insurance policy and to challenge unreasonable costs through the First-tier Tribunal (Property Chamber).

Non-disclosure. Failing to disclose material facts — such as previous claims, the presence of cladding, or a history of subsidence — can invalidate the policy entirely. All parties involved in arranging the insurance must ensure full and accurate disclosure.

Cladding and fire safety. Following the Grenfell Tower tragedy and the Building Safety Act 2022, insurers now scrutinise the external wall systems of blocks of flats very carefully. Buildings with certain types of cladding may face higher premiums, additional conditions, or difficulty obtaining cover at all. An EWS1 (External Wall System) form may be required.

Choosing the Right Cover

When selecting block of flats insurance, it is important to consider the specific characteristics of the building and the requirements set out in the leases. Key factors include:

• The reinstatement value — obtain a professional valuation rather than estimating
• The perils covered — ensure the policy covers all risks specified in the leases
• Liability limits — £5 million is common, but larger blocks may need higher limits
• Terrorism cover — check whether this is required by leaseholders' mortgage lenders
• Engineering inspection — required if the block has lifts, boilers, or pressure systems
• Excess levels — understand the excess for different types of claim, particularly escape of water

Working with a specialist insurance broker can help ensure you obtain appropriate cover at a competitive price. A broker with experience in block insurance will understand the nuances of different building types — from Victorian conversions to modern purpose-built developments — and can access specialist markets that may not be available directly. If you manage a property portfolio, a combined policy may offer better value.

What Affects the Cost?

The cost of block of flats insurance varies significantly depending on a range of factors:

• The reinstatement value and size of the building
• The number of flats and storeys
• Construction type — standard brick, timber frame, concrete, or non-standard materials
• Location — flood risk zones, subsidence areas, and crime rates all affect pricing
• Claims history — a poor claims record, particularly for escape of water, increases premiums
• Cladding and external wall systems — buildings with combustible cladding face higher costs
• Age and condition of the building — older buildings may have higher risks
• Security measures — CCTV, entry systems, and fire alarms can help reduce premiums

Escape of water claims are currently one of the biggest cost drivers in block insurance. Insurers have seen a significant increase in the frequency and severity of these claims, driven by ageing pipework, poor maintenance, and the increasing use of flexible hoses in plumbing installations.

Next Steps

If you are a freeholder, managing agent, or RTM company responsible for insuring a block of flats, it is worth reviewing your current arrangements to ensure they remain appropriate and competitive. Key actions include:

• Obtain an up-to-date reinstatement valuation from a qualified surveyor
• Review the lease requirements to ensure your policy meets all specified obligations
• Check your Section 20 compliance if you have a long-term agreement in place
• Consider working with a specialist broker who understands block insurance
• Review your claims history and consider risk management measures to reduce future claims

Focus Insurance Services has experience arranging block of flats insurance for a range of building types across the UK. If you would like to discuss your requirements, please contact our team for a no-obligation conversation about your cover needs.