How do Reinstatement Cost Assessments work?

Row of Typical English Terraced Houses at London.

Having the correct insurance cover in place for buildings and contents is essential, regardless of whether you own one property or a wider portfolio. A failure to do so can be both problematic and costly, whether you are underinsured or overinsured. The former will leave you exposed to potentially large costs in the event of a claim, while the latter means you are paying higher insurance premiums than necessary. This is where Reinstatement Cost Assessment (RCA) can be invaluable.

At Tim Greenwood & Associates, we conduct Reinstatement Cost Assessment for commercial premises in Surrey, Sussex and Kent. Our inspections are cost assessments which are carried out according to RICS guidelines, ensuring that your insurance reflects the most up-to-date rebuilding costs.

What is a Reinstatement Cost Assessment?

RCA is the basis upon which RICS Chartered Surveyors carry out appraisals of property, plant, machinery and contents for insurance purposes. The reinstatement cost of a building means to repair, reconstruct or renew the asset to a condition that is equal to but better than new. It’s a comprehensive assessment that often incudes inspecting and reporting on a wide range of properties of different sizes, types and uses; including complex structures and installations.

How often do you need to carry out a RCA?

The only way that an adequate level of insurance cover can be ascertained is by way of a Reinstatement Cost Assessment, which accurately assesses the value of the asset. According to RICS recommendations, a full RCA should be carried out every 3 years and whenever significant alterations have been made to the building(s), or additional investment or downsizing in plants, machinery or contents has taken place.

How is a Reinstatement Cost Assessment conducted?

To carry out a Reinstatement Cost Assessment for building/contents insurance purposes, the buildings are inspected by a qualified surveyor and assessed on a building by building basis. Schedules of buildings, main plant and machinery/contents are undertaken on site, along with figures for general contents. Building Cost Information Service (BCIS) published data, information supplied by machinery manufacturers and agents, internet research and internal databases are used for additional desktop investigations. Reinstatement costs are calculated that also take account of the costs of demolition, professional and statutory authority fees and any relevant statutory obligations.

What are the challenges?

While surveyors should have no problems assessing traditional buildings such as factories, office blocks or educational facilities, specialist buildings may present a greater challenge. That is when prior experience in surveying, valuing and assessing specialist structures or listed buildings can be invaluable, as is cooperation with other experts with particular expertise in these types of structures. At Tim Greenwood & Associates, we have extensive experience in all aspects of building surveying, having provided professional guidance and specialist advice to commercial clients in all sectors for many years.

What happens in the event of a claim?

Should the unthinkable happen and you need to make an insurance claim, your reinstatement cost estimate will be called upon as a guide to inform the insurance pay-out. The insurance company will appoint a loss adjuster to assess and manage the claim. At this point, a surveyor may be appointed to assess the damage and invoices in the reconstruction process to monitor that the building is suitably reinstated. This is why it is so critical that Reinstatement Cost Assessments provide the full cost of demolition and rebuilding along with any other cost allowances.

What are the risks of inadequate insurance cover?

If the building, plant, machinery or contents are underinsured, the insurer could invoke the Condition of Average clause, which reduces the total claim proportionally to the value of underinsurance. Clearly, this represents a huge financial risk for the policy holder who could find themselves with considerable financial liabilities to make up for the shortfall in the payout.

How can Tim Greenwood & Associates help?

If you require expert independent advice on Reinsurance Cost Assessments for your commercial property asset, Tim Greenwood & Associates would be delighted to be of service. We have many years’ experience of commercial building surveying in London and across the South East, including Reinstatement Cost Assessments for clients in a wide range of commercial sectors. To discuss your RCA requirements or any other commercial surveying enquiries, please contact us on 01737 829070 or send us a short message here.