If you are acquiring - or considering acquiring - the freehold of your building, you will know that the process requires a great deal of planning and that there are many legal and technical issues to consider.
Once formed, your new freehold company will have full responsibility for the management of your building and this includes insurance. It’s something which many people overlook.
Directors of residents associations have, broadly speaking, two options when considering how to insure the property they are responsible for. There is the non-advised route, such as buying your policy direct from the internet with no professional help, or the advised route where you use a broker such as ourselves to present to you a number of suitable options.
For some simple insurance policies we would actually recommend the non-advised route – indeed as a company we do offer non-advised web-based services for, for example, tradespeople looking to cover their liabilities on their equipment or business activities.
However with something as complex as protecting a building, with all the unforeseen accidents and instances which can happen, we would certainly recommend going down the advised route.
Know your sums
A key reason for pursuing an advised route is that you need to know that the limits of the sums that you’re trying to insure for are adequate, so that the policy will pay out the right amount when you make a claim.
We recently took on a new client in Shepherd’s Bush in London who had not had their block of flats valued for three years. On their previous year’s policy it was valued at £21m but on our recommendation the owners revalued the property and it transpired that it was valued at £42m.
At the time the residents association had an average clause in place, which meant that any claim against the property would be reduced by the proportion by which they were underinsured. As the property had been valued at half of its current worth, it would have meant the value of any claim they made would also have been halved. Without us there to advise them, it could have had serious ramifications.
There are also some specific covers which are particularly suitable for residents associations – features which you might struggle to find out about without the assistance of a broker who is expert in this field.
For example did you know about trace and access cover, which protects you against repairing the source of a water leak and not just the damage it causes? Costs here could run into thousands, when you’re looking at removing tiling and accessing the plumbing work.
Residents associations might also be interested in 72 hour claims provision, which covers all claims which result from one problem, as long each piece of damage is reported within 72 hours of the first.
Aside from meaning that only one excess payment is made, this cover also brings the added bonus of reducing claims frequency in the long-term, which means underwriters are likely to look on you more favourably when your policy is due for renewal.
The 72 hours claims provision issue also raises the importance of communication between directors of residents associations and the tenants in a block of flats. It is important that you let residents know that such features are in place, and that residents communicate between themselves when problems arise. Something like a regular newsletter, to encourage residents to take actions such as switching off their water when they go on holiday, may help here.
Changes brought about by the Insurance Act 2015 placed extra onus on brokers when providing information to insurers about the risks their clients face. This gives us an opportunity to create better value by ensuring that the policy is at less risk of a challenge from the insurer if a claim happens. It’s just one more reason why we would recommend the advised route as being the option that residents associations take when they are looking to insure themselves.
Residents associations can find themselves in trouble if they are underinsured and we would encourage residents to speak to a broker who understands the nature of a risk in its totality and will look to ensure that you’ve got the right level of cover.
The right cover. The right limits.
It’s important to ensure you have the rights cover, so having a relationship with a broker with access to a wide range of products offering economies of scale, who understands your requirements and can make sure claims are managed quickly and effectively is, in our view, invaluable.
10% discount and free a guide
Kerry London has a team of experts at arranging insurance for blocks of flats and they can advise you about these and other relevant covers you may need to consider.
Kerry London are offering 10% off insurance premiums (gross premium, excluding Insurance Premium Tax) for block of flat insurance policies.
To take advantage of this discount all you need to do is call Kerry London on 020 8225 1053 or visit their website by clicking here to Get a Quote At the same time Kerry London will send you a copy of their guide to insurance for blocks, produced in conjunction with ALEP.
As well as the 10% off the insurance premium they'll send you a free guide to insurance for enfranchised blocks of flats. Click here to leave your details.
Kerry London Ltd is authorised and regulated by the Financial Conduct Authority