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Avoid the risk of being under insured…

Building Reinstatement Cost Assessments

Having the right insurance cover is essential, whether you own a single property or a large portfolio. If you’re under-insured, you run the risk of exposure to a shortfall if you need to make a claim.

It is well documented that construction costs are on the up. This in turn has had significant implications for property insurance values in the UK.

Be aware of the difference between reinstatement cost (the amount it would cost to rebuild your building in the event of total loss) as opposed to the market value of your property; they are far from the same.

If your insurance cover is based on the market value of your building and the nightmare scenario of total destruction happens, you could well end up under insured and out of pocket. If you have a policy that covers the market value of your property, it does not take into consideration the cost of construction. While your building may be worth say £5 million, it may cost £7 million to rebuild it, resulting in a considerable shortfall.

Many properties are unique and don’t easily fit into a generalised cost bracket. In preparing an accurate reinstatement cost, numerous factors will need to be considered and assessed, including the following;

  • The presence of deleterious materials such as asbestos
  • Temporary works associated with shoring and weatherproofing adjoining structures
  • Site constraints; limited access, adjacent infrastructures etc.
  • Regional differences: costs can differ considerably in different regions of the country
  • Property design
  • Building services; air conditioning and such like
  • Listed buildings: which require specific techniques as well as materials during a rebuild
  • Professional fees including specialist input where necessary, and statutory approvals

Its well-publicised that market values fluctuate, but so too does the cost of construction which is why we advise undertaking a full Reinstatement Cost Assessment at lease every five years to ensure that you are adequately covered with a yearly informal overview to account for inflation.

It’s all to easy to think it won’t happen to you, but with over £5 million paid out every day in claims for commercial property, it is better to be safe than sorry!

For more information and to see how we can help, please contact:- 

John MacMillan BSc (Hons) MRICS 

Senior Associate

T: 0114 478 5833