Should a party wall agreement include insurance requirements, and what happens if one owner lets coverage lapse?

Yes, insurance requirements are a genuinely important thing for a party wall agreement to address, precisely because both properties depend on the same shared structure. A well-drafted agreement typically requires each owner to maintain adequate property and liability insurance covering their portion of the wall and building, and often requires each owner to notify the other if their coverage lapses or changes materially, so the issue can be dealt with before something actually goes wrong.

The risk of skipping this becomes clear if something does go wrong: if one owner's coverage has lapsed and, say, a fire or structural failure affecting the shared wall occurs, the other owner may find there's no insurer to claim against for that portion of the damage, leaving them to pursue the responsible owner directly, a far slower, less certain, and more adversarial path than an insurance claim would have been. This is exactly the kind of gap an insurance clause and notice requirement is meant to prevent.

Anyone drafting or reviewing a party wall agreement should specifically include insurance requirements and a notification obligation for lapses, rather than assuming both owners will simply maintain adequate coverage on their own without any way to verify it.