Freehold building insurance is arranged over an entire structure because that is the only unit a building can sensibly be insured as. Where a building is divided into flats or maisonettes held on long leases, the freeholder insures the whole and apportions the cost. Everything else about this cover follows from that single structural fact.
Why the whole building
Fire, flood and subsidence do not respect the boundaries between demises, and a building settled flat by flat by different insurers would not be rebuilt. Lenders know this and expect whole building cover on flats and maisonettes. Leases are drafted to produce it, which is why the freeholder rather than the occupiers holds the policy.
Apportioning the premium
Usually through the service charge, often by floor area or by a fraction stated in the leases. The apportionment should be consistent, documented and available to leaseholders, who may ask for it and may challenge a charge they consider unreasonable. Publishing it annually is the simplest way to avoid the argument.
What the freeholder must get right
The sum insured, from a professional reinstatement assessment refreshed periodically. The peril list, against what the leases require. The interests noted, leaseholders and mortgagees where the leases say so. Liability for the common parts. Employers liability if anybody is employed there. And the renewal, which on a small freehold with no managing agent is the thing most likely to be missed.
Where it goes wrong
An index linked figure that started wrong and has been multiplied for twenty years. A peril list quietly narrowed to reduce a service charge complaint. And a freeholder who is an absent individual rather than a company, where a change of address means renewal notices reach nobody and the building is uninsured before anybody notices.
Questions people ask about freehold building insurance
Why is a block insured as one building?
Because damage does not stop at a demise boundary and separate settlements would not rebuild it. Lenders expect whole building cover on flats and maisonettes.
How is the premium split?
Usually through the service charge, by floor area or by a fraction stated in the leases. It should be documented and available to leaseholders.
Who checks the sum insured?
The freeholder, from a professional reinstatement assessment refreshed periodically. Index linking alone perpetuates whatever the starting figure was.
What if the freeholder stops renewing?
The building becomes uninsured, which is everybody's problem. Leaseholders may have remedies under the lease and through the tribunal.