Rebuild Cost Assessment

Buildings should always be insured for the amount it would cost to rebuild them. However, fewer than one in ten commercial properties in the UK are covered correctly.  If you are over-insured you are probably paying too much for your buildings insurance. If you are under-insured, you face a reduced pay out in the event of a claim.  

Insurance claims can be reduced by hundreds of thousands of pounds due to under-insurance.   

Watch this short video to see why being underinsured can be a big problem and how you can avoid it. 

What is a Rebuild Cost Assessment?

A Rebuild Cost Assessment – or RCA – is a professional valuation of what it would cost to demolish and fully reinstate your property in the event of a total loss. It is not the same as a market valuation or an estate agent’s estimate of what your home is worth.
The rebuild cost takes into account the cost of materials, labour, professional fees, site clearance and any specialist requirements specific to your property. For older buildings, listed properties, or those built using non-standard construction methods, the rebuild cost can differ very significantly from the market value — often considerably higher.

Why does rebuild cost matter?

Your buildings insurance policy covers you up to the sum insured you declare. If that figure is too low and you need to make a significant claim, your insurer may apply what is known as the “average clause” — reducing your payout proportionally to reflect the degree of underinsurance.
For example, if your property should be insured for £500,000 but you have only declared £350,000, you are insured for 70% of the true value. A claim of £100,000 could therefore result in a payout of only £70,000 — leaving you £30,000 out of pocket at an already stressful time.

Who is most at risk of underinsurance?

Underinsurance is a risk for any property owner, but certain groups are particularly vulnerable:

• Homeowners who have not reviewed their sum insured in several years, or who set their buildings cover based on the purchase price or market value rather than a proper rebuild figure.
• Owners of older or period properties where construction costs are higher due to specialist materials or craftsmanship required in any reinstatement.
• Listed building owners where planning requirements and the use of traditional materials can push rebuild costs significantly above standard estimates.
• Landlords and property investors managing multiple properties who may not have reviewed individual rebuild costs across a portfolio.
• Commercial property owners where the complexity of the building, contents and fit-out can make accurate valuation particularly challenging.

The impact of construction cost inflation

Building costs in the UK have risen substantially in recent years, driven by increases in material and labour costs. A sum insured that was accurate two or three years ago may no longer reflect current reinstatement costs. This makes regular review of your rebuild figure more important than ever.

Read more in our article on rebuild costs here,

or browse these two from Momentum Insurance here:

Underinsurance could cost family almost half a million

Should VAT Be included in Rebuild Costs?

As your broker we have access to a cost-effective building valuation service, which will provide you with additional comfort and reassurance that your building is correctly insured.  You’ll receive a comprehensive Rebuild Cost Assessment (RCA) report guiding you on how much you should insure your buildings for.   

Protect your organisation from the potentially severe consequences of underinsurance. 

Contact us today to find out more.