Reinstatement Cost Meaning

It is important to understand the difference between the reinstatement cost of a building as opposed to its market value.

The reinstatement cost of a building relates to the sum it should be insured for in the event that a significant issue occurs, such as a fire, whereby the building will need to be reconstructed.  The insurers therefore require information on the cost of that reconstruction which is known as the reinstatement cost.  This will be different to the market value of the property which relates to the property value if it was subject to sale.

The rebuild cost is prepared as an assessment and this assessment will review the nature of the construction and estimate the cost of rebuilding the property in the event the building requires demolishing and rebuilding in its entirety.  Whilst in most cases an insurance claim is based on partial damage, insurers require the reinstatement cost to reflect the worst case scenario whereby complete reconstruction is required.

A reinstatement cost assessment takes into consideration not only the rebuild cost but also other matters such as regional costs, and site specific issues.  The site specific issues can include matters such as a confined site, access restrictions, party wall matters, the requirement for temporary works to name a few.  The reinstatement cost will also include provision for fees as appropriate to the reconstruction works.  These can include architects, surveyors, engineers and other relevant consultants, along with statutory fees such as Planning and Building Control costs.

It is important that the reinstatement cost is accurate for the building, on which insurance cover is based.  In the event that the cost is inaccurate, it can lead to adjustments being made on insurance payouts when a claim is made.

Tim Greenwood and Associates have experience in preparing Reinstatement Cost Assessments.  Please contact us for further information.