Rising insurance premiums often dominate renewal discussions, and as one of the largest costs in a block’s service charge, stakeholders want to ensure they’re receiving competitive pricing and comprehensive cover.
If the sum insured is set too low, the insured may be exposed to significant risk where buildings are insured for sums that no longer reflect the true cost of reinstatement. This can complicate insurance placement and renewal discussions, leaving leaseholders and directors vulnerable to insufficient cover in the event of a claim of any size.
For block and estate managers, insufficient cover is not simply an insurance technicality. It presents a practical risk that can affect complaints, cash flow, reputational standing and the smooth day to day management of a building.
Why Accurate Declared Values Are Essential
A Declared Value is a key component from which insurance premiums are calculated. It represents the cost to rebuild the entire property in the event of total loss. Many blocks continue to rely on inaccurate or unsubstantiated Declared Values, including historic valuations that have been subject to indefinite index‑linked increases, figures based on market value, or a developer’s original construction cost. None of these provide an accurate Declared Value, yet they are frequently inherited and retained.
In recent years, rebuild costs have risen sharply due to increases in material prices, labour shortages, and evolving regulatory requirements. Where Declared Values are not reviewed on a professional basis, underinsurance can develop gradually and remain unnoticed for years. According to BCH’s 2025 findings, 9 out of 10 buildings had inaccurate Declared Values prior to a reinstatement appraisal, with 6 out of 10 being underinsured. BCH also found that 3 in 10 leaseholders were potentially overpaying due to inflated Declared Values
The Real Impact When Claims Occur
Underinsurance is best identified before a loss occurs. If a building is insured for less than its true reinstatement cost, insurers may apply the Clause of Average in the event of a legitimate claim, settling the claim in proportion to the level of cover held.
This can lead in significant shortfalls in the amount an insurer is liable to pay. Wider consequences often include delayed settlements, extended reinstatement periods, leaseholder disputes, and increased scrutiny of the managing agent responsible for the block.
Underinsurance in Blocks of Flats and the Role of Accurate Reinstatement Cost Assessments
Insurers and brokers require confidence that Declared Values reflect current reinstatement requirements. Index linking does not fully capture changes in specification, building regulations, professional fees or site clearance costs.
Those contributing towards the building insurance premium need confidence that they are receiving the appropriate protection, for best value, and cover that will respond fully in the event of a claim of any size.
For block and estate managers, and well as brokers, this underlines the importance of clear, independent, professional appraisals that can be relied upon and explained with confidence.
How Bch’s Reinstatement Cost Assessments Reduce Risk
BCH’s RICS compliant Reinstatement Cost Assessments provide a clear and accurate calculation of true rebuild costs. Each building is assessed on an element-by-element basis, producing a reinstatement report as unique as the building itself.
Accurate RCAs are recognised as best practice in effective insurance risk management. They help protect leaseholders, support smoother claims outcomes, reduce the risk of disputes, and provide clear evidence of responsible and transparent governance. By clearly evidencing how Declared Values have been established, they give insurers, brokers and managing agents confidence that cover levels are appropriate and robust.
The Importance of Accurate Declared Values for Flats
Accurate and regularly reviewed Reinstatement Cost Assessments play a vital role in ensuring buildings are insured correctly and that insurance premium remain both comprehensive and competitive. This supports brokers in securing the most appropriate cover and helps managing agents demonstrate best practise.
