Buildings Insurance with Karbon and Zurich

Insurance helps protect people and organisations from financial loss and to meet regulatory obligations. If something goes wrong, it is there to help you recover.

Karbon has arranged buildings insurance for your home with Zurich on a Reinstatement basis. This means:

• Zurich will pay the cost of repairing or rebuilding your home to the same standard it was in immediately before the damage.
• The aim is to put you back in the position you were in before the loss, using a “new for old” approach to the building itself.

Under the policy, buildings are defined as:

• The structure of your home (for example walls, roof, floors, ceilings), and
• Permanent fixtures and fittings such as fitted kitchen units and bathroom suites.

Your home is insured against loss or damage caused by a number of events (known as perils), including for example:

• Fire
• Storm
• Flood
• Escape of water (for example from burst pipes)
• Impact by a road vehicle
• Theft (damage to the building)
• Subsidence

A full list of what is covered – and what is not – is set out in your Summary of Cover letter.

Many different factors influence how premiums are calculated. These include:

• Construction type
  How the building is constructed (for example traditional, timber‑framed, or modern methods). Different materials and methods:
• React differently to different types of loss, and
• Cost different amounts to repair or rebuild.
• Previous claims (loss history)
  Claims made by Karbon in the past, as well as trends in the wider housing market, affect the price. Insurance works on a pooling principle – the premiums of the many pay for the claims of the few.
• Local risk factors
  For example:
• Risk of flooding or storm damage
• Likelihood of subsidence
• Wider market and regulatory factors
  Such as:
• Overall claims inflation
• Changes in building regulations and safety requirements

All of these influence the cost of insurance.

The starting point is the Reinstatement Value of your property. This is different from the market value.

• Reinstatement Value is the estimated cost to rebuild your property from scratch, including:
• Materials
• Labour
• Professional fees (for example architects, surveyors)
• Planning and other associated costs

Zurich applies a rate, which is the same for all Karbon leaseholders and shared owners. This rate has been agreed based on:

• Karbon’s overall claims experience, and
• The construction methods and materials used across the portfolio.

Your individual premium is then calculated by applying this rate to the Reinstatement Value of your home (and any other relevant factors set out in the policy).

No. Karbon does not pay Zurich any administration fees, broker fees or commissions for arranging our insurance programme.

No. Karbon does not receive any commission for arranging this insurance.

Insurance is based on the principle of pooling:

• The premiums of many customers are pooled together to pay the claims of the few who experience losses.

This means everyone contributes, and those who suffer a loss are supported from the overall pool.

Your Terrorism Insurance is placed with a separate provider, not with Zurich. That is why it appears as excluded on your Zurich Summary of Cover.

The charge you see for terrorism cover relates to this separate policy.

The market value of your property (what it might sell for) can go up, down or stay the same.

However, insurance is based on the Reinstatement Value – what it would cost to rebuild your property. This often increases each year because:

• Building materials
• Labour costs
• Professional fees
• Alternative accommodation costs

All tend to rise over time due to inflation.

To ensure there is enough cover to rebuild your home if needed, the Reinstatement Value is adjusted annually.

Your home forms part of a larger property portfolio within Karbon Homes. We are required to purchase insurance through the Government’s public procurement process. This is a legal requirement designed to:

• Ensure best practice
• Promote open, compliant and fair competition
• Achieve best value for money across the organisation

In line with common practice for housing providers subject to UK procurement rules, insurance is usually placed under a long‑term agreement (for example 3 years plus an option for 2 more).

Long‑term agreements:

• Typically provide more competitive pricing than annual placements
• Avoid the significant time and cost of running a full tender every year

Running a full tender annually would not generally provide value for money for Karbon or for leaseholders.

Karbon:

• Works with independent insurance consultants who advise on and help arrange our insurance programmes, and
• Follows public procurement guidelines to ensure that all tenders and placements are:
• Open
• Compliant
• Fair

This framework is designed to secure the most appropriate cover and value for money over the long term.

Over the last five years there have been several significant influences on premiums, including:

• Claims inflation for property insurance, which at times has been upwards of around 20%
• Increases in the cost of:
• Building materials
• Labour
• Energy
• Specialist contractors and services
• Supply chain disruption
• Karbon’s own claims performance
• Rising Reinstatement costs across the sector

All of these factors have contributed to higher insurance costs.

As well as a significant increase in reinstatement values of properties.

No. As the freeholder, Karbon is responsible for arranging buildings insurance for leaseholders and shared owners.

For leaseholders in blocks of flats:

• Your building is treated as one physical structure.
• If different leaseholders arranged their own separate buildings policies, there would be a high risk of:
• Gaps in cover (some parts of the building not insured at all), or
• Dual insurance (two policies on the same part of the building), causing complications with claims.

The most sensible and secure approach is one policy that covers the entire fabric of the building, including:

• Roof
• External walls
• Common areas and shared services

This approach is also generally required by most mortgage lenders.

For shared owners:

• Karbon retains a financial interest in your property.
• Our agreements require Karbon to be responsible for arranging the buildings insurance.

No, not in a straightforward way.

• Doing so would typically breach:
• Your lease terms
• Funding agreements
• Mortgage lender requirements