In accordance with the terms of the lease, your building must be insured. The lease covenants in respect of insurance usually prescribe what insurances need to be put in place.
However, as most leases are based on historic covenants, they are often out of date and are not relevant to the insurable risks that are faced by property owners today.
1 BUILDING INSURANCE
One insurance which will almost certainly be required under the terms of any property lease will be for the building itself. This will cover the structure of the property such as the walls and the roof against damage loss and theft as well as any fixtures and fittings which you would not take out the property if you were moving.
One anomaly in this, is that carpets are not normally considered part of the building insurance and need to be covered under your contents insurance.
2. TERRORISM INSURANCE
Even if a lease does not specifically dictate that terrorism cover is required, it is advisable to have this cover in place to safeguard the best interest of the lessees.
3. DIRECTORS AND OFFICERS INSURANCE
Where a Board of Directors are making decisions on behalf of others, then Directors & Officers Insurance Cover, often referred to as D&O, should be taken out.
Again, this is something that is not often mentioned in the lease, but on the basis that Directors are taking decisions on behalf of others, it is sensible that they should be afforded some protection.
D&O cover means that the Director’s Liability is limited and that should they take a wrong decision they cannot be sued personally.
4. PUBLIC LIABILITY INSURANCE
Most building insurance cover will include public liability insurance. This protects the property if a member of the public or an employee suffers personal injury or damage to the property at the property.
It can pay for the costs of subsequent legal expenses or compensation claims and is an integral cover where there can be any question of a claim and where members of the public or are at risk. Again, this may not be specifically mentioned in the lease but would be deemed necessary.
It is also important to note that should a development be communal areas only, and all properties are freehold houses, then a standalone public liability policy will be required.
5. ENGINEERING INSURANCE
Finally, and again depending on the lease and the property itself, engineering insurance should be considered where there are any electrical installations at a property be they boilers, lifts, or electric gates.
It is often thought that these installations are covered under the building’s insurance and often they are covered by insured perils within the main policy. However, if the damage is due to a technical fault or there is a personal injury as a result of the installation this would not be covered.
Taking out engineering insurance provides you with the peace of mind that the installation has been inspected and considered fit for purpose.