If you own property, no matter what size or for what purpose, you need to ensure you’re insured to the right level should anything happen. Giving your insurers a rebuild figure for your property is not as simple as it may initially sound. If you’re underinsured, you could face a significant shortfall in funds to cover costs in the event of a claim, and if you’re over insured you’ll likely be spending a lot more than needed on insurance premiums. The former is becoming more prevalent in the current market, which has seen significant rises in materials and labour costs, leaving many property owners at risk. This is where a Building Reinstatement Cost Assessment comes in.
So, what is a Building Reinstatement Cost Assessment? A Building Reinstatement Cost Assessment (BRCA), often known just as a Reinstatement Cost Assessment is an accurate assessment of the cost of the demolition and rebuilding of property for insurance purposes.
With this in mind, let’s assess the importance of a Reinstatement Cost Assessment when making renovations to any property that you manage or own to fully understand how it could be important for you to be covered.Â
What is a Building Reinstatement Cost Assessment?
In fact, recent research has found that 80% of UK properties are under-insured – to put that in context, that’s around 587,000 high net worth homes and commercial property with a total value of £340 billion standing without adequate buildings insurance.
If your property was to fall into serious disrepair and you were to make a claim, there is a 79% chance therefore that you would not receive the full payout from your insurance company. To remedy this, you should want to have your building’s worth accurately assessed so that it can be covered by your insurers.
If you work in the following areas, you will need to know your building’s reinstatement costs for insurance purposes:
- Asset Management
- Property Development
- Homeowner or Buyer
- Property Conversationalist
These areas and professions would be most in need of having their buildings assessed. You may be wondering what the difference is between a BRCA and a valuation, however. They are similar enough for there to be some confusion. Let’s take a look at a valuation in comparison to a BRCA to give a clearer view of each and you can decide which is right for you and your property’s needs.
What is the Difference Between Reinstatement Cost and Valuation?
A Valuation is the suggested price for sale, whereas a BRCA is an estimate of the cost should the property need to be reinstated.
A Valuation of a property is how much it is believed to be worth on the current market. A Building Reinstatement Cost Assessment is a closer examination of everything that is needed to return a brick-and-mortar dwelling to its current condition.
To give further explanation, a valuation may take into account the view, proximity to good schools and neighbourhood. A 2-bedroom flat in the North of England would be worth considerably less than a similar structure in the South of England based on various factors. This would all count towards a higher valuation.
A BRCA takes into account the cost of labour, materials and planning if your house would need a rebuild. You would notice some regional differences in the above when having your building assessed. For example, labour might be at a higher cost in the South, or certain materials may be more readily accessible in certain areas of the UK.
Why Do You Need a Building Reinstatement Cost Assessment?
The first thing your insurer will do when you make a claim is to check the building is insured for the correct amount. In the event your property is underinsured, many insurance policies will typically revert to what is often referred to as an ‘averaging clause’.
This generally means the final payout of any claim will be reduced by the degree to which the property was underinsured.
So, if a building would cost ÂŁ300,000 to rebuild, but is insured for only ÂŁ150,000 then the insurer considers the property to be 50% underinsured. This means if you made a claim of ÂŁ150,000, the insurer would only pay ÂŁ75,000 or 50% of the sum insured.
The activation of averaging clauses is common and many people get caught out by it. Indeed, we have worked with a number of clients who have received reduced cash settlements due to averaging clauses being misunderstood. This can be negotiated, however, this method of mitigation is limited in comparison to either having a one-off assessment or requesting a desktop review to see if there is a potential your building is underinsured.
What is Involved in a Reinstatement Cost Assessment?
When we conduct a BRCA, we undertake an inspection of your property or properties and issue you a report with rebuild costs for all of the elements taken into account. For example, it’s important to take into consideration:
- Clearance of the site
- New plans to be drawn up
- Professional fees
- Labour costs
- Materials costs.
When talking about reinstatement, costs are given to repair, reconstruct or renew assets to an equal, but not better, condition. All costs are in line with the Building Cost Information Services (BCIS) as an industry standard.
How Often Should a Reinstatement Cost Assessment Be Done?
The RICS recommends existing BRCAs are reviewed regularly, generally every 3 years or upon reinsuring, to reflect fluctuations in materials and construction costs. You would also seek a BRCA as work nears completion or immediately prior to the completion of a sale. An existing assessment should also be looked at again and reissued if changes are made to the building such as extensions or extensive refurbishment.
This will enable us to make sure all your materials and buildings are fully covered under your insurance policy. You don’t want to spend tens of thousands on an extension or refurbishment, only for the reinstatement value to reflect the original building, so keeping on top of and conducting BRCAs every few years are something to factor into your budget and maintenance plans.
Reinstatement Cost Assessment With Fourth Wall
Our assessment includes visiting the site to conduct an inspection and measurements. From there, we will issue you with a report that you can understand and be able to get your property correctly valued for reinstatement. We report on an extensive range of properties of all shapes, sizes and uses, so you can be assured we’ve seen it before and know how to assess the reinstatement value of your property accurately.
Our team of RICS-accredited assessors are trained to give detailed analysis and reports on the exact cost of a building’s reinstatement. We offer a diverse range of services and experience across the residential, commercial and heritage sectors, including:
Here at Fourth Wall, we’re uniquely placed to ensure your building is adequately assessed and insured to the correct amount. Consider getting in touch with us if you have any questions regarding BRCA and how they apply to you and your project.
Get in touch ➡️ our online form is here or contact us via reimagine@fourthwallbc.com / 0161 706 1131 / 0114 400 0254.
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