Introduction

Owning or living in a leasehold property comes with shared responsibilities, and insurance is one of the most important. One of the most common areas of confusion for leaseholders is understanding the difference between the building insurance arranged by the freeholder or management company, and the individual insurance policy that each leaseholder should arrange themselves.

While the building may already be insured as part of the service charge, this does not necessarily mean your personal belongings, internal finishes, or legal liabilities are protected. Understanding the difference can help avoid costly surprises if something goes wrong.

What is the Building Insurance Policy?

In most leasehold developments, the freeholder or management company arranges a block buildings insurance policy on behalf of all leaseholders. The cost is usually recovered through the annual service charge.

This policy is designed to protect the structure and fabric of the building as a whole. Typically, it covers:

• The main structure of the building
• Roofs and external walls
• Foundations
• Communal areas
• Lifts and shared systems
• Pipes and drains serving the building
• Reinstatement costs following major insured events

The policy usually covers risks such as:

• Fire
• Flood
• Storm damage
• Escape of water
• Subsidence
• Impact damage
• Malicious damage

The management company or freeholder is responsible for administering the policy, arranging renewals, handling claims relating to communal or structural damage, and ensuring adequate cover is in place in accordance with the lease requirements.

At Levels Property Management, we work with specialist insurance brokers to ensure developments are appropriately protected and compliant with lease obligations.

What the Building Insurance Usually Does Not Cover

A common misunderstanding is that the block policy covers everything within your apartment. In reality, most building insurance policies have limitations, and leaseholders should carefully review what is and is not included.

The block policy will not usually cover:

• Personal belongings
• Furniture and electronics
• Carpets and soft furnishings
• Internal decorations
• Accidental damage inside your home
• Personal liability claims
• Alternative accommodation in all circumstances
• Legal expenses relating to personal disputes

In some cases, the lease may state that certain internal items such as flooring, kitchen units, or bathroom suites fall under the leaseholder’s responsibility rather than the building policy. This is why understanding your lease and insurance responsibilities is essential.

Why Leaseholders Should Have Their Own Insurance Policy

Even where a comprehensive block policy exists, every leaseholder should strongly consider arranging their own contents and leaseholder insurance policy. This provides protection for the parts of your home and lifestyle that the building insurance does not cover.

An individual leaseholder policy can help protect against:

Damage to Your Contents

Your possessions can be expensive to replace. Contents insurance can cover items such as:

• Sofas and furniture
• TVs and electronics
• Clothing and jewellery
• Computers and home office equipment
• Appliances
• Personal valuables

Without cover, replacing damaged or stolen items could become a significant financial burden.

Accidental Damage

Many policies can include accidental damage protection for incidents such as:

• Spilling liquid on carpets
• Damaging flooring
• Cracked sanitaryware
• Accidental damage to fitted items

These incidents are unlikely to be covered under the building policy.

Escape of Water Liability

Water leaks are one of the most common causes of insurance claims in apartment buildings.

If a leak originates from your apartment and damages another property, you could potentially be held liable for uninsured losses, excesses, or negligence claims. Leaseholder liability insurance can provide important protection in these situations.

Alternative Accommodation

If your property becomes temporarily uninhabitable following an insured event, your personal policy may help cover the cost of temporary accommodation and associated expenses.

Legal Expenses Cover

Many policies also include legal protection, which may assist with disputes involving neighbours, contractors, employment matters, or property-related legal issues.

What Type of Cover Should Leaseholders Consider?

Every property and lease is different, but leaseholders should generally consider the following:

• Contents Insurance
  Protects personal possessions and internal belongings.
• Tenant’s Improvements Cover
  Useful if you have upgraded kitchens, bathrooms, flooring, or made other internal improvements that may not be fully covered by the building policy.
• Public Liability Insurance
  Provides protection if someone is injured within your property.
• Accidental Damage Cover
  Offers additional peace of mind for everyday mishaps.
• Home Emergency Cover
  Can assist with urgent issues such as plumbing failures, electrical problems, or lost keys.
• Legal Expenses Cover
  Provides support for certain legal disputes and associated costs.

Understanding Insurance Excesses

It is important to remember that block insurance policies often include substantial excesses, particularly for escape of water claims. For example, the building policy may carry an excess of several hundred or even several thousand pounds per claim. Depending on the circumstances and lease wording, these costs may be recoverable from the leaseholder responsible for the incident.

Some personal leaseholder insurance policies can include “block excess cover,” helping reimburse these costs where applicable.

What Should Leaseholders Do?

To ensure you are adequately protected:

• Review your lease carefully
• Understand what the building policy covers
• Request a copy of the insurance summary from your managing agent
• Check whether internal fixtures are your responsibility
• Arrange your own contents and liability insurance
• Inform your insurer if you sublet your property
• Keep valuations of high-value items up to date

The Importance of Understanding Your Responsibilities

Insurance in leasehold buildings can sometimes feel complicated, particularly when responsibilities are shared between leaseholders, freeholders, and managing agents. However, understanding the distinction between the building insurance and your own personal cover is essential for protecting both your property and your finances.

Having the right cover in place can provide peace of mind and help avoid disputes or unexpected costs if something goes wrong.

If you are unsure about your insurance responsibilities or would like further guidance on your development’s insurance arrangements, our team at Levels Property Management is always happy to help.