Why are Reinstatement Cos Assessments  important?

Reinstatement cost assessments are crucial to ensure you are adequately insured for the correct amount. If the reinstatement cost of your property is undervalued this means you could potentially be uninsured for the difference in value between what you are insured for and the actual amount to rebuild your property in a total loss event.

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How are they produced?

The process of producing a reinstatement cost assessment includes a surveyor visiting the site to undertake a detailed inspection. On this inspection the surveyor will take various measurements to ascertain the gross internal floor areas. The surveyor will also inspect the building to confirm its form of construction and will identify any areas of special interest or elements of the property which have value which would be in excess to the norm, so they can be included within the assessment.

Following the site inspection, the surveyor will complete the cost assessment to ascertain the re-build figure. In accordance with RICS guidance and best practice the assessment is completed by using the gross internal floor area and applying building rates. These rates are obtained from BCIS (Building Cost Information Service). The rates used will be dependent on the type and use of the building.

Other factors which are included in the assessment are uplift in prices for sites and properties which will be more problematic to re-build e.g. properties which are listed or set within a conservation area, terrace properties, or properties set on sloping sites, or which have restricted access etc.

For more complex or listed properties a different more elemental breakdown may be preferrable due to their intricacies.

What’s included within the assessment?

The assessment doesn’t just include the figure for the cost of the re-build but other factors which may also need to be reinstated in the event of a total loss event. Such elements could include external landscaping, outbuildings such as garages, annexes, or sunrooms.

Furthermore, a reinstatement cost assessment should also include other professional costs which could occur including Planning and Building Regulation fees, Party Wall surveyor fees, architect and structural engineer fees and many more.

Finally, the assessment will also take into account VAT. VAT will be applicable on most commercial properties. Whereas, no VAT should be applied to residential properties, as a new build residential property will be 0% VAT rated.

However, VAT will still need to be included upon any demolition costs and any professional fees.

Who is responsible for a Reinstatement Cost Assessment?

Regularly conducting reinstatement cost assessments is typically the responsibility of the commercial property owner, building manager, or tenant. In cases of leased properties, the obligation to secure the appropriate level of insurance is generally borne by the freehold owner, though lease agreements may vary in their specifications. In addition, for residential dwellings it is the responsibility of the homeowner to ensure your home is insured for the correct figure.

How happens in the event of a claim?

If a claim arises, your reinstatement cost estimate will serve as a reference for the insurance payout. An assigned loss adjuster, appointed by your insurers, will oversee the claim and evaluate both the extent of the damage and the repair costs. Surveyors are also frequently engaged to assess damage and review invoices throughout the reconstruction process, ensuring that the building is reinstated appropriately.

When do I need one?

Our recommendation is to conduct a comprehensive reinstatement cost assessment every three years, supplemented by annual desktop evaluations (your insurer will complete the desktop evaluations). Cost adjustments to the sum insured are made based on Tender Price Indices (TPIs) to ensure accuracy.

Surveyor’s assessments should be presented in a format that facilitates precise adjustments to declared values, utilising the latest cost data from the Building Cost Information Service (BCIS). In cases of significant property changes, a thorough reassessment is advised to guarantee sufficient insurance coverage.

Given the current scenario of escalating build costs, shortages in labour, and unprecedented energy prices, property underinsurance is becoming more prevalent. It is strongly advisable to undergo a reinstatement cost assessment to safeguard your property and align your insurance coverage with current market rates.

Summary

A reinstatement cost assessment is a vital service for all types of property. At Survey Network Ltd we are well placed to advise and produce these reports for any type of property. Please give us a call or get in touch today to arrange an inspection. Additionally, if you are purchasing a residential property, we can also provide a reinstatement cost assessment as an additional bolt-on service.

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