Why Accuracy Is Key In Determining Your Reinstatement Costs

Back in July we discussed, the inflated costs of construction fuelled by supply and demand and the impact on the cost of reinstating a building from scratch. This is an ongoing and likely long term issue. To add to this, we are now entering storm season and the insurance market generally is seeing an increase in buildings insurance claims. This means the risk associated with this type of insurance has increased, and subsequently, so have buildings insurance rates.
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In a nutshell, we cannot stress enough the importance of reviewing your building sum assured.   Latest statistics shockingly show that 94% of buildings in the UK are insured for the wrong amount, with 80% underinsured and 14% over insured [1].

The observations we have made within our client base, that bring the stark reality of this situation into focus include:

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• We estimate that around 4 out of 5 clients who own commercial premises have not reviewed their current building sum insured for a number of years, meaning there is likely an insurance shortfall.
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• Of the 160+ clients that have undertaken a survey in the last 9 months, almost 90% were under insured.

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Why does underinsurance matter?

Under insurance can have drastic consequences on any claims settlement payment you receive. This can be for both partial and total losses. Insurers may decide to evoke the condition of ‘average’ which reduces the sum insured proportionately by the amount of under insurance, should you not be able to produce written evidence of the calculation. Not receiving the full claims payment could have drastic consequences for your business and your ability get your building fully restored.
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Reinstatement costs are not straightforward

Every so often and mistakenly, the sale value of the property may be insured which is quite different to the cost of rebuilding; this includes associated costs for site clearance, debris removal, architect’s costs, planning fees, and where necessary, VAT.
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We recommend that you obtain a reinstatement survey every three years from a chartered surveyor to establish the correct reinstatement amount and period for your building, to ensure your insurance cover is adequate.
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A reinstatement survey can also identify what period you should set your business interruption and or rental income sum indemnity period for, meaning you don’t lose out on unnecessary income whilst your property is being repaired.
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We can arrange this either via a desktop survey or an onsite survey.

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Please call Jade Concannon on 01273 424 904 or email jade.concannon@qcaregroup.co.uk for more information.

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[1] Source: rebuildcostassessment.com newsletter September 2021

Watch our interview with Risk Control specialist Jade Concannon about why buildings reinstatement assessment assessments are so vital, particularly now.