An Insurance Valuation or Reinstatement Cost Assessment (RCA) is used to calculate the potential cost to rebuild a structure and provide a ‘day one reinstatement’ figure, also known as the declared value.
It is essential for commercial property owners to arrange regular assessments of their building(s) to ensure that they are adequately insured in the event of a fire or other devastating incident. The sum insured must allow for the cost of rebuilding the destroyed property or restoring the damaged section of the building to a condition which is substantially the same as, but no better than, the condition of the building, or section of the building, when new. Over-estimating the value of a building will result in excessive premiums being levied, while under-estimating the reinstatement cost will mean that insufficient funds are available to reinstate the property, which has the potential to cause irrecoverable damage to any business.
At Bradley-Mason, we carry out professional, impartial assessments in accordance with the very latest Practice Standards from the Royal Institution of Chartered Surveyors (RICS) (RICS Guidelines – Reinstatement Cost Assessments of Buildings (3rd edition). Using online cost information from the Building Cost Information Service (BCIS), we ensure that we are using the most up-to-date information in order to provide an accurate RCA.
Our team has many years’ experience in surveying all kinds of properties, from small office premises to large multiplex cinemas and expansive residential portfolios. Working with us, you can be sure that our insurance assessment helps you arrange the correct amount of cover year on year.
What is a Reinstatement Cost Assessment?
Most commercial buildings in the UK are insured on a reinstatement (i.e. new for old) basis. In theory, it does not matter the age of a building is or its state of repair, although the damage to the building will only 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. The day one reinstatement basis is the most popular form of this, particularly for leased buildings insured by a landlord.
The declared value is the sum representing the insurance assessment of the cost of reinstatement. The assessment makes allowances for the additional cost of reinstatement to comply with public authority requirements, the cost of removing debris, including demolition and shoring up damaged areas of the building, and the cost of professional fees incurred in the reinstatement of the building. RCAs are important in securing appropriate insurance cover, particularly in the event that you have to rebuild your property. Should you need to make a claim, if your insurers find that your property is not adequately covered then you may only be entitled to a part-payment of the overall reinstatement cost.
Who is responsible for a Reinstatement Cost Assessment?
It is usually up to the commercial property owner, building manager or tenant to arrange regular RCAs. Where the property is leased, the freehold owner is usually responsible for obtaining the appropriate level of insurance, though some lease agreements may differ.
What information is needed for an RCA to be completed?
When undertaking an initial RCA, our surveyors will need an accurate address and permission to access all areas of the property. Building plans may also be required, in addition to Health and Safety documentation and any other relevant information.
The final Reinstatement Cost calculation will take into account the building’s size, age, construction, location and associated services and utilities. The more information that is provided, the more accurate the RCA can be.
Subsequent RCAs may be carried out without a physical inspection, but this may vary for specific properties and is dependent upon the level of information already available.
How frequently should an RCA be arranged?
We recommend that a complete RCA is carried out every three years, with desktop evaluations carried out annually with costs amended based on Tender Price Indices (TPIs). Our assessments are presented in a manner to allow the declared values to be adjusted accurately using the latest cost data obtained from the Building Cost Information Service (BCIS). If there are any significant changes made to the property then a re-assessment should be carried out in full to ensure that adequate insurance cover is in place.
It is vital that an RCA is accurate as an undervalued property could prevent you from receiving the full funds needed to cover the cost in a claim. Construction costs have risen steeply over the last 2 years and there is a risk that many properties may be under insured. The typical approach of applying an uplift in line with inflation can leave property owners at risk if an insurance claim had to be made, hence we are finding that may companies are undertaking a full review of their portfolio.
If you are in urgent need of a Reinstatement Cost Assessment, please get in touch with Bradley-Mason today. Call us on 01423 611 604 and a member of the team will happily help you or, alternatively, email us at info@bradley-mason.com.
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