What the policy actually responds to
The cover is narrow and specific: a mortgagee-only policy responding where the landlord attempts to issue a section 8 notice under the Housing Act 1988 because of outstanding ground rent due from the borrower under the long lease. The insured is the lender as defined in the policy.
So it is not a policy you claim on. If the landlord moves to forfeit and the worst happens, the lender’s loss is covered; your interest in the flat is a separate question that the policy was not written to answer. Reading the schedule to see who the insured is, rather than assuming, is the single most useful thing to do with the document.
The practical protection for you is not the policy at all — it is paying the ground rent when it is demanded, keeping the managing agent’s address current, and not letting a dispute about the rent turn into non-payment of it. The statutory trap needs three months’ rent to be more than three months late before it closes.
What it means when you come to sell
A policy of this kind usually runs with the title and can benefit successors, but that depends on its terms, and on whether the next buyer’s lender will accept it. Lenders differ about indemnity policies generally, and about this class in particular.
Keep the policy document with the deeds, along with the correspondence showing that a variation was sought and refused. The next conveyancer will want to establish quickly that the defect is known, insured and unchanged, rather than discovering it afresh.
If the ground rent is itself something you would rather be rid of, the statutory lease extension route remains open and substitutes a peppercorn rent for the whole new term. That removes the reason for the policy, which is a different proposition from insuring around it.