Reinstatement Cost Assessments

Q: I have a market valuation of my property – will this be sufficient?

The simple answer is no. The market value of a property (sale price) is not the same as the cost of demolishing and rebuilding the property in the event of a fire or similar unfortunate event. Construction costs can often be greater than the market value of a property.

RICS Standard rebuild cost assessment for building insurance.

A Reinstatement Cost Assessment (also known as an Insurance Valuation) is a calculation of the estimated cost to rebuild a property or structure, and thus the sum for which the property is insured.

It is essential for property owners and investors to arrange regular assessments of their buildings or portfolios to ensure that they are adequately insured in the event of a fire or destruction of the property.

Precise assessment of the insured sum is critical to avoid under or over estimating the value.

Over estimating the value of reinstatement will result in excessive insurance policy premiums, while under estimation will mean that there are insufficient funds available to reinstate the building, leaving owners or occupiers with potential shortfall costs that are unviable.

CH Building Consultants provide accurate, impartial reinstatement cost assessments, compliant with Royal Institution of Chartered Surveyors Guidelines.

Utilising online cost information from the Building Cost Information Service, actual construction costs from recent comparable projects and other industry recognised data sources, you can rely upon our assessment for your insurance needs.

We have over 30 years’ experience in surveying all types of commercial properties from multi-storey city centre offices to rural industrial estates.

We can provide assessments for assets with multiple buildings at a single site or portfolios of properties, with costs fully scheduled for each structure or building within the group.

Most buildings in the UK are insured on what is commonly known as the ‘day one reinstatement’ basis. Insurance cover arranged under such policies allows for claims to be settled on a ‘new for old’ basis if repairs are actually carried out. In principle, it does not matter how old a building is or what its state of repair.

If insurers have agreed indemnity by reinstatement cover, the damage to the building will be repaired to a condition substantially the same as, but not better than or more extensive than, its condition when new and the insured will not have to contribute to any betterment.

‘Day one reinstatement’ is derived from the fact that the sum insured is made up of two elements: a ‘declared value’ and an ‘inflation provision’.

Declared value is the cost of rebuilding as at the date of the commencement of the insurance period without any provision for inflation.

Inflation provision is a percentage uplift selected by the insured to cover inflation during the insurance year and during the subsequent period required for reconstruction to be completed.

Construction costs have risen steeply in recent years and frequently do not correlate with inflation.

There is a risk that many properties may be under insured if renewals have been based upon general financial trends and it is important to obtain a Reinstatement Cost Assessment from a qualified surveyor.

CH Building Consultants will provide you with a reliable, accurate and bespoke reinstatement cost assessment for you property that will comply with your insurers guidelines and requirements.

Reinstatement Cost Assessments FAQs

Here are some of the most common questions we hear from our clientele.

Why do I need a Reinstatement Cost Assessment?

It is important to ensure that the reinstatement value declared for your property (the insured sum) is correct. Under estimation can lead to a financial shortfall in the unfortunate event that a building is damaged or destroyed, with insurers refusing to match the actual cost of the rebuilding work.

The under estimation is often discovered when an insurance claim is made, at the very time when it is most inconvenient. Over estimation can result in over payment of excessive premiums and other penalties in the insurance policy.

I have a market valuation of my property – will this be sufficient?

Do I need to update my Reinstatement Cost Assessment?

Changes in construction costs do not directly correlate with inflation rises. Factors such as international conflicts, trade agreements, economic growth and labour shortages influence the construction industry and the costs of labour and materials.

It is important to utilise qualified surveyors that have access to reliable industry data to accurately estimate your rebuild cost. The Royal Institute of Chartered Surveyors recommend that a Reinstatement Cost Assessment is updated every three years.

Are online estimations reliable?

It is recommended that assessments are based upon an inspection of the property to be insured. There are often specific characteristics of the property that cannot be determined from a remote assessment that require inclusion in the rebuild cost.

Items such as basements, the requirement for support of adjoining structures or the limitations of site access for contractors will affect the cost of rebuilding the property.

Ask a Question