What does Freeholder Insurance include?
As standard a Freeholder Insurance Policy with Property Insurance Centre may include the following:
- Buildings cover will Full Accidental Damage
- Communal Contents cover
- Legal Expenses
- Machinery Breakdown
- Trace & Access of leaks in the building
- Alternative Accommodation
- Loss of Rental Income
- Loss of keys & replacement locks
- Property Owners Liability up to £5,000,000
- Eviction of Squatters
- Cover to outbuildings and garages
It is important to point out that when contents are added to a Freeholder Insurance policy, it only covers the ‘landlords’ contents or communal contents. For example with a block of flats, this also most exclusively means contents of the communal hallways including carpets and furniture.
Top Tip – Don’t go adding an endless amount of contents to your freehold policy and expect leaseholders to obtain coverage for their own private contents from this addition. Each unit should have their own contents policy in place which should also provide some occupiers liability coverage within their own unit or flat– which otherwise they would not have unless they invest in their own insurance policy.
For example, take a block of 6 flats. How many insurance policies as a minimum do you think there ought to be? Yes, we could add as many as you want with what’s on offer out there, but as a minimum there should be 7. Each flat owner should have their own contents policy and there should be a single buildings insurance policy to cover the material damage. This is as a minimum, remember. Many freeholders may end up adding Terrorism Insurance Policies or Directors & Officers Insurance policies also.
Why do I need Freeholder Insurance – Can I just not insure my own flat?
This is a question that is asked more commonly than one would think. It is normally a question from someone who has simply just moved in to a block of flats and has not been informed that buildings insurance is already in place and that the new occupant should be charged for it within a surcharge or something similar. We recommend you check with your Freehold Company to see if a policy is in place first, before you go looking for a single self-contained flat insurance policy. Chances are, you will simply be doubling up on the insurance as buildings cover is already in place! Top Tip – Always ask for proof of insurance and request the policy renewal date from your freeholder – do not assume just as you are being charged for it, that it is in place. This has unfortunately caught out many leaseholders before. You have the right to know who your insurer is & how they can be contacted. If you are unable to get a copy, then this would be a time to seek out a single self-contained flat insurance policy or perhaps discuss a Right to manage set up with your fellow leaseholders.
How much will Freeholder Insurance cost me?
A freeholder insurance policy will vary in price considerably according to the size of the building, which is insurance terms will depend greatly (but not exclusively on the reinstatement cost of the building). The reinstatement cost (or rebuild cost) will be the cost to replace the building should the worst happen. It will include:
- Surveyors Fees
- Architects Fees
- Bricks & Mortar & other materials
- Professional fees
These are just some of the costs you should consider when deciding what a rebuild cost should be. Getting the rebuild cost right is essential & probably one of the most important aspects to consider when taking out an insurance policy. Get it wrong and you run the risk of being underinsured which may mean a claim will be potentially affected by the condition of ‘average’ within an insurance policy. Take the following case study that should help you see the consequences of underinsurance on a freeholder insurance policy:
Under Insurance example Case Study:
Mike declared his sum insured as £100,000. A fire occurs and damages the properly severely, resulting in £40,000 worth of damage. A loss adjuster is appointed to the handle the claim, and assesses that the building is underinsured & should in fact be insured for £200,000. Mike’s claim will now be affected by average. As Mike has underinsured his building by 50%, his claim settlement will be reduced by 50%. Mike will therefore receive a settlement figure of £20,000, instead of £40,000.
We must therefore strongly advise, that you insure your buildings, contents, stock, commercial vans or any other insurable item for its correct value.
If you do not know your sums insured and you are insuring a building, we would advise that you refer to the survey that you should have when purchasing your property. This should provide a sum insured for insurance purposes. For any other item, we would advise that you obtain a valuation before providing sums insured.
So, how do you avoid being underinsured on your freehold? The only real way to make sure you get the correct sum insured, is to obtain a professional valuation carried out by a surveyor. The costs are of such a survey can be split up among leaseholders, which would be money well spent if you are say, 50% under-insured and have a fire claim, as is the case with the above example.
Other factors in determining the premium will relate to risk factors such as:
- Number of claims
- Postal Code
- Proximity to water courses
- Year of build
- Any Grade Listing on the building
- Type of occupants – Students & DSS Tenants will often be charged more
- How long owned
- Type of construction
These factors along with every £1,000 of rebuild on the property will affect the amount of premium you will pay. Generally speaking, the bigger it is more expensive the premium.
What can we do to save costs on Freehold Insurance Policies?
- Discounts for no claims
- Discounts for number of years you have held insurance for
- Discounts for Professional occupants & leaseholders
- Low fees chargeable
- Premium portions returned on cancelled policies
- Add communal contents free of charge
- Add Legal Expenses where possible free of charge
If you are responsible for insuring a Block of Flats and need Freeholder Insurance, then speak to one of our specialist advisors. Property Insurance Centre are specialists in Block of Flats Insurance Policies and can insure converted houses, purpose built flats and maisonettes up to any size. We can cater for non-standard buildings, properties with claims and large sums insured. Call us today on 0800 085 3761.
For more information on Freeholds and leaseholds visit the Government’s website here, where you will find detailed information on the subject.