What is a Reinstatement Cost Assessments and Why Are They Essential for Property Owners?
A Reinstatement Cost Assessment (RCA) is a vital step in ensuring your property is adequately insured. Without an accurate assessment, you risk being underinsured, meaning that in the event of a total loss, your insurance payout may not cover the full cost of rebuilding your property. This can leave property owners facing significant financial shortfalls.
How Are Reinstatement Cost Assessments Conducted?
A qualified RICS surveyor carries out a detailed site inspection, taking precise measurements to determine the Gross Internal Floor Area (GIFA). During this assessment, the RICS surveyor:
- Identifies the building’s construction type and materials.
- Highlights any special features or high-value elements that could impact reinstatement costs.
- Assesses location-specific factors, such as listed status, conservation area restrictions, or challenging rebuild conditions (e.g., terraced properties or restricted access sites).
Following the site visit, the surveyor calculates the rebuild cost using data from BCIS (Building Cost Information Service), ensuring the figures align with current market rates. For complex or listed buildings, a more detailed elemental breakdown may be required.
Why Accurate Reinstatement Cost Assessments Matter
Insurance companies base coverage on these assessments, so an undervalued RCA can lead to financial risk, while an overestimated RCA could result in unnecessarily high premiums. By securing a professional RICS-compliant assessment, property owners can ensure they have the right level of coverage—providing peace of mind and financial security.
What’s included within the assessment?
A Reinstatement Cost Assessment (RCA) goes beyond just calculating the rebuild cost—it also accounts for additional factors that may need reinstating in the event of a total loss. These can include external landscaping, outbuildings (such as garages, annexes, or sunrooms), and other structural elements.
Additionally, a comprehensive RCA should factor in professional fees that could arise during the rebuilding process. These may include:
- Planning and Building Regulation fees
- Party Wall surveyor costs
- Architect and structural engineer fees
- Other necessary consultancy expenses
VAT considerations are also crucial in the assessment. While most commercial properties are subject to VAT, residential properties are typically zero-rated for new builds. However, VAT must still be applied to demolition costs and professional fees, ensuring that the total reinstatement cost reflects all necessary expenses.
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.
What 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 a Reinstatement Cost Assessment??
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 we help place RICS surveyors who 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, one of the self employed surveyors we work with can also provide a Reinstatement Cost Assessment as an additional value-add service.
