TL;DR: Building insurance for a block of flats is normally arranged by whoever is responsible under the lease, usually the freeholder, RMC, or RTM company, with the cost shared between leaseholders through the service charge. The policy must cover the full cost of rebuilding the block, plus liability and other risks. Directors have a legal duty to insure to full reinstatement value and keep the cost reasonable and transparent. This guide explains what to get right.
Insurance is the cost most blocks think about once a year, at renewal, and then forget. It's also one of the easiest to get quietly wrong: a rebuild figure set too low, a commission buried inside the premium, a gap in cover that only reveals itself when there's a claim and it's too late to fix.
For an RMC or RTM director, building insurance is not an administrative afterthought. It's a core responsibility, and getting it wrong carries real consequences, both financial and legal.
This guide is for the people who arrange the cover and carry the duty (directors and freeholders) and the leaseholders who pay for it through the service charge and want to know the bill is fair.
It's also timely. Block insurance premiums have risen sharply since 2021, and new rules are changing how insurance costs, and the commissions hidden inside them, are disclosed.
Below, we cover who is responsible, what the policy must cover, how to get the rebuild value right, why premiums have risen, your transparency rights, and what happens when you actually need to claim.
Who Is Responsible For Insuring A Block Of Flats?
Responsibility for insuring a block of flats is set by the lease, and usually falls to the freeholder, the residents management company, or the right to manage company. Whoever is responsible arranges a single buildings insurance policy covering the whole structure and communal areas, and the cost is shared between leaseholders through the service charge. Individual leaseholders do not normally insure the building themselves.
Buildings insurance is cover for the physical structure of a building, including the roof, walls, floors, and communal areas, against risks such as fire, flood, and escape of water. For a block of flats, it's arranged as one policy for the whole building rather than flat by flat.
The Lease Decides
The lease is the document that says who is responsible, so that's always the first place to check. Usually it's the freeholder, but where leaseholders collectively own the freehold or have set up an RMC or RTM company, the duty sits with them, often discharged through a managing agent. Where the freehold is shared among the leaseholders (share of freehold), they arrange the cover jointly. The point is not to guess: the answer is written into the lease or the management documents.
What The Block Policy Covers (And What It Doesn't)
The block policy covers the structure and the communal areas. It does not cover the contents of individual flats, which is why a leaseholder usually only needs contents insurance, not buildings. A leaseholder who lets their flat out should also check whether they need landlord-specific cover for their own letting risks, since the block policy won't extend to those. If you want the wider picture of how this sits alongside everything else in managing a block, insurance is one piece of a larger set of responsibilities.
What Should A Block Insurance Policy Cover?
A block insurance policy should cover the building to its full reinstatement value, plus property owners' liability, and usually employers' liability, directors and officers cover, engineering inspection for lifts and plant, and loss of rent or alternative accommodation after an insured event. Terrorism and legal expenses cover are often added. The lease usually specifies the minimum risks that must be covered.
Work through this as a checklist for your own policy:
- Full reinstatement value: the complete cost of rebuilding the block, the foundation of the whole policy
- Property owners' liability: cover protecting the freeholder, RMC, or RTM against claims from third parties injured, or whose property is damaged, in connection with the building. £5 million is a common limit, with larger blocks needing more
- Employers' liability: required if the block directly employs anyone, such as a caretaker
- Directors and officers (D&O) insurance: cover protecting RMC or RTM directors against personal claims arising from their role, which connects to the personal liability that comes with being an RMC director
- Engineering inspection and breakdown: for lifts and other plant, which must be inspected regularly
- Loss of rent or alternative accommodation: to cover costs if the building becomes uninhabitable after an insured event
- Terrorism and legal expenses: often added, and sometimes required by leaseholders' mortgage lenders
Full Reinstatement Value
This is the foundation, and it's the one most often got wrong, so it has its own section below. Everything else is built on insuring the building for what it would actually cost to rebuild.
Liability Cover
Property owners' liability protects against claims from third parties, for instance a visitor injured in a communal area. Where the block employs staff, employers' liability is a legal requirement. And D&O cover protects the directors personally, which matters because the role carries unlimited personal liability.
The Other Essentials
Engineering cover handles the lifts and plant that need regular statutory inspection. Loss of rent or alternative accommodation cover deals with the aftermath of a serious event, when residents can't live in the building. The lease usually sets the minimum risks that must be covered, so check the policy against it.
Getting The Reinstatement Value Right (And The Underinsurance Trap)
The reinstatement value is the cost of rebuilding the block, not its market value, and getting it right is critical. If the declared value is too low, the insurer can apply "average" and pay only a proportion of any claim. A professional reinstatement cost assessment, reviewed regularly to keep pace with construction inflation, is the way to avoid being underinsured.
Reinstatement value is the full cost of rebuilding the block from scratch, including demolition, site clearance, professional fees, and meeting current building regulations.
Rebuild Cost, Not Market Value
These are two different numbers, and confusing them is a common and expensive mistake. A flat's market value reflects location, demand, and the land. The rebuild cost is purely the cost of construction. In some areas the rebuild cost is higher than the market value; in others lower. What matters for insurance is the rebuild cost, set by a professional assessment, not a guess based on what the flats sell for.
The Average Clause: A Worked Example
If the declared reinstatement value is too low, the insurer can apply the average clause: a policy term allowing the insurer to reduce a claim payout in proportion to any underinsurance. Say a block's true rebuild cost is £4 million but it's insured for only £2 million. If a £500,000 fire claim is made, the insurer can pay just half, £250,000, because the building was insured for half its real value. The block is left to find the rest. This is why getting the figure right matters even when no total loss ever occurs.
Reviewing The Value Regularly
Construction costs rise, often several percent a year, so a reinstatement value that was right three years ago may now be well short. The value should be reviewed regularly, and reassessed after any significant building works, to keep the cover adequate. Listed buildings need particular care, because rebuilding with matching materials and traditional methods costs considerably more.
Why Have Block Insurance Premiums Risen So Much?
Block insurance premiums have risen sharply since 2021 for three main reasons: construction cost inflation pushing up rebuild values, more frequent and severe climate-related claims such as flooding and subsidence, and a post-Grenfell reassessment of fire risk that has reduced insurer appetite for blocks with cladding concerns. Building-specific factors such as claims history and height also affect the premium.
The Three Main Drivers
Construction cost inflation has pushed rebuild values up, and since premiums track rebuild cost, they've risen with it. Climate-related events, particularly flooding and subsidence, have made claims more frequent and more expensive. And since the Grenfell Tower fire, insurers have reassessed their exposure to fire risk across residential blocks, reducing capacity and loading premiums for buildings with any cladding concerns.
Cladding And Fire Risk
Blocks over 11 metres with combustible cladding have faced the steepest rises, and some have struggled to obtain cover at all. An EWS1 form, an External Wall System form used by lenders and insurers to confirm the fire safety status of a building's external walls, is often required for these blocks. This overlaps directly with a director's wider building safety duties, so insurance and fire safety should be managed together rather than in isolation.
What Pushes A Specific Block's Premium Up
Beyond the macro drivers, individual factors raise a particular block's premium:
- Cladding or unresolved external wall fire risk
- Height, with high-rise blocks attracting significantly higher premiums
- A poor claims history, where frequency matters more than the size of individual claims
- Escape of water exposure, the most frequent claim in blocks of flats
- Long unoccupied periods, which insurers treat as higher risk
Some of this is outside a director's control, but good risk management, current fire safety documentation, and a clean claims record all help.
Transparency, Commissions, And Your Right To Challenge
Leaseholders pay for block insurance through the service charge and have the right to see the policy and challenge an unreasonable cost at the First-tier Tribunal. Insurance commissions, where an agent or freeholder takes a share of the premium, have been a major hidden cost, and the Leasehold and Freehold Reform Act 2024 will replace them with a transparent permitted fee. The FCA also introduced disclosure rules in 2024.
Your Right To See The Policy And Challenge The Cost
Because the premium is part of the service charge, leaseholders are entitled to a summary of the insurance policy and can apply to the First-tier Tribunal if they think the cost is unreasonable. That right has been strengthened by recent reforms, which give leaseholders better access to information about what they're paying for.
The Commission Problem And The 2026 Reforms
Insurance commission, a share of the building's insurance premium paid to the managing agent or freeholder by the broker, has historically often been undisclosed and charged to leaseholders. The Financial Conduct Authority found in 2023 that broker remuneration on this kind of insurance had risen by around 40% between 2019 and 2022, and that the parties sharing in those commissions often could not explain what service of value they provided in return. The FCA introduced disclosure rules in January 2024, and the Leasehold and Freehold Reform Act 2024 goes further, replacing hidden commissions with a transparent permitted fee, targeted to take effect in 2026 though the exact date is still being finalised. The direction is clear: leaseholders should be able to see what they pay for insurance, and what anyone takes for arranging it.
When Something Goes Wrong: Making A Claim
When an insured event happens, such as an escape of water or fire, the responsible party notifies the insurer, documents the damage, and arranges the repair. Escape of water is the most frequent and costly claim in blocks of flats, often affecting several units at once. A managing agent handles the claim process, and the quality and speed of the repair depend heavily on who carries it out.
The Claims Process
In outline: notify the insurer promptly, document the damage with photographs and records, let the insurer assess the claim, and arrange the repair once it's agreed. The policy excess (the amount the building pays towards each claim) is set out in the policy, and who bears it is determined by the lease and the circumstances.
Why The Repair Matters As Much As The Policy
A claim is only as good as the repair that follows it. Escape of water is the classic example: water escaping from pipes, tanks, or appliances, the most frequent type of insurance claim in blocks of flats, can damage several flats at once and needs fixing quickly before it gets worse. A policy that pays out is little comfort if the repair then drags on for months. This is where how the building is managed makes the real difference to residents.
The Airsat Approach
When a claim arises on a block Airsat manages, the repair is handled in-house through Airsat Construction. That means after an escape of water or fire, the work is carried out directly by the same accountable team, rather than waiting on a chain of third-party contractors to quote, schedule, and attend. For residents, that's the difference between a problem contained in days and one that lingers for weeks.
How Airsat Manages Block Insurance
Airsat arranges and manages block insurance as part of its block management service: ensuring the building is insured to full reinstatement value, that the cover meets the lease requirements, and that the cost is transparent with no hidden commission. When a claim arises, the repair is handled in-house through Airsat Construction, so residents are not left waiting on a chain of contractors.
With block management from Airsat, the building is insured for what it would actually cost to rebuild, the cover is checked against the lease, and the premium is passed through transparently. Behind that sit ARLA Propertymark accreditation, Client Money Protection, and local knowledge of Bristol's building stock, and the in-house maintenance team that turns an insurance payout into a finished repair.
Conclusion
Building insurance is one of the core responsibilities of running a block, and getting it right protects both the building and the people who own and live in it.
The essentials are clear: know who's responsible under the lease, insure to full reinstatement value to avoid the underinsurance trap, make sure the cover meets the lease, understand why premiums have risen, and keep the cost transparent and free of hidden commission.
The bigger picture is that insurance is only as good as the repair that follows a claim. A well-insured, well-managed building is one where, when something goes wrong, it gets put right quickly.
If you're an RMC director, freeholder, or leaseholder in Bristol who wants block insurance arranged properly and transparently, with repairs delivered in-house, contact Airsat Real Estate.
Frequently Asked Questions
Who Is Responsible For Buildings Insurance In A Block Of Flats?
Responsibility is set by the lease and usually falls to the freeholder, the residents management company, or the right to manage company, often acting through a managing agent. Whoever is responsible arranges a single policy for the whole building, and leaseholders contribute through the service charge. Individual leaseholders do not normally arrange buildings insurance themselves.
Do Leaseholders Pay For Buildings Insurance?
Yes. While the freeholder, RMC, or RTM arranges the policy, the cost is shared between the leaseholders and recovered through the service charge. Leaseholders have the right to see a summary of the policy and to challenge the cost at the First-tier Tribunal if they believe it is unreasonable.
What Does Block Of Flats Insurance Cover?
A block policy covers the building to its full reinstatement value, plus property owners' liability and usually employers' liability, directors and officers cover, engineering inspection for lifts and plant, and loss of rent or alternative accommodation after an insured event. Terrorism and legal expenses cover are often added. It does not cover the contents of individual flats.
Do I Need Buildings Insurance For My Leasehold Flat?
In most cases no, because the freeholder, RMC, or RTM insures the whole building and you contribute through the service charge. You will usually only need contents insurance for your own belongings. Always check your lease, as a small number of arrangements require individual leaseholders to insure their own flat.
Why Has My Block Insurance Gone Up?
Block insurance premiums have risen sharply since 2021 due to construction cost inflation increasing rebuild values, more frequent climate-related claims such as flooding and subsidence, and a post-Grenfell reassessment of fire risk affecting blocks with cladding. Building-specific factors such as claims history and height also play a part.
Can Leaseholders Challenge Buildings Insurance Costs?
Yes. Insurance is part of the service charge, and leaseholders can challenge the cost at the First-tier Tribunal if they consider it unreasonable. New transparency rules under the Leasehold and Freehold Reform Act 2024 will also replace hidden insurance commissions with a transparent permitted fee, giving leaseholders clearer information.
What Is Reinstatement Value And Why Does It Matter?
Reinstatement value is the full cost of rebuilding the block from scratch, including demolition, professional fees, and meeting current building regulations. It is usually different from the market value. If the declared value is too low, the insurer can apply "average" and pay only a proportion of any claim, so it should be set by a professional assessment and reviewed regularly.