What Is Freehold Insurance? A Guide for Property Owners

What Is Freehold Insurance? A Guide for Property Owners

Freehold insurance — more formally known as freeholder buildings insurance — is a specialist type of property insurance designed to protect the owner of the freehold title of a building. It is a legal requirement for freeholders who have granted leases to tenants, and it is fundamentally different from the standard home insurance purchased by owner-occupiers or from the contents insurance held by individual leaseholders.

What Does Freehold Insurance Actually Cover?

Freehold insurance covers the physical structure of the building and the legal liabilities attached to owning it. At a minimum, a freeholder buildings policy will cover:

• The structure of the building: This includes the walls, roof, foundations, floors, staircases, communal corridors, windows, and external doors — everything that makes up the fabric of the property.
• Fixed service installations: Plumbing, electrical wiring, central heating systems, lifts, and other fixed equipment integral to the building.
• Property owners' liability: Protects the freeholder against claims for personal injury or property damage brought by leaseholders, visitors, or members of the public.
• Loss of rent: If part or all of the building is made uninhabitable by an insured event such as fire or flooding, this pays out the rent that cannot be collected during the repair period.

Most specialist freeholder policies also include employers' liability (required by law if you employ any staff), legal expenses, and the option to add accidental damage or engineering inspection cover.

Who Needs Freehold Insurance?

Any person or company that owns the freehold of a building in which they have granted one or more leases is legally obligated to arrange adequate buildings insurance. This includes:

• Individual landlords who own the freehold of a converted house split into flats
• Investors who have purchased the freehold of a purpose-built apartment block
• Residents' Management Companies (RMCs) and Right to Manage (RTM) companies who have acquired the freehold
• Property investors who own freehold commercial buildings with upper-floor residential leases

If you own a share of the freehold jointly with other leaseholders, the obligation to insure the building applies collectively to all the freeholders.

Is Freehold Insurance a Legal Requirement?

Yes. Under the Landlord and Tenant Act 1985, a freeholder who has granted a lease is legally required to keep the building insured to its full reinstatement value against the standard risks. Leaseholders have the right to challenge the adequacy of the insurance arrangement and can require their freeholder to provide details of the policy — including the insurer, policy number, and sum insured — on written request.

Failure to maintain adequate insurance is a serious breach of duty and could expose the freeholder to significant financial loss in the event of a major claim, as well as potential legal action from leaseholders.

How Much Does Freehold Insurance Cost?

The cost of freehold insurance depends on several factors: the type and size of the building; the rebuilding cost; the location and any specific flood or subsidence risk; the number of units and whether they are rented out; and the claims history on the property. Because freehold buildings insurance is a specialist product, working with a broker or specialist insurer who focuses on freeholder and landlord insurance will give you access to products that are genuinely suited to your needs.

Get a Fast Quote for Freehold Insurance

We specialise exclusively in freeholder building insurance — so you get advice and cover from people who understand the obligations and risks of freehold ownership. Get a FAST Quote today and ensure your building is covered to the correct reinstatement value with all the protection a freeholder needs.