What are Reinstatement Cost Assessments?
Reinstatement Cost Assessments (RCAs) provide the figures insurance companies require for the demolition and rebuilding of the property in the event of fire, flood etc, usually on the basis of a ‘day one reinstatement’ (the declared value). Insurance companies require this to be updated usually in two to five yearly cycles to ensure that an accurate insurance value is in place. This is particularly important in the current climate, given the exponential increase in build cost inflation since the Covid-19 pandemic.
Over or under-insuring your asset can result in significant issues. Over-insure your asset and you’ll have to pay a premium on your insurance which won’t necessarily align with what your property is worth, while under-insuring your property could be catastrophic in the event of a claim that relies on an under-estimate of the costs. Any pay-out will be restricted to the total value stated by the customer on the policy proposal, which may have originated from a report of an RICS surveyor. We follow the RICS guidance on providing a Reinstatement Cost Assessment which looks at an assessment value in a structured and holistic way, incorporating any unique features, the location, historical status and hard landscaping, to name a few. Allowance is made for demolition (including party walls where applicable), site clearance and any fees likely to be incurred.
Landlords should pay particular attention to fixtures and contents, including tenants’ fixtures, fittings and external areas that the terms of the lease require the landlord to insure. Tenants’ may also hold insuring obligations, so it is important to ascertain who has the responsibility to supply the value. If these obligations seem uncertain, our Lease Advisory department may be able to assist before engaging a Building Surveyor to carry out an RCA.
Clients should bear in mind that desktop assessments that do not involve site visits fall outside the scope of the RICS guidance note and insurers may not accept this as a basis for setting cover. Please get in contact with one of our Building Surveyors if you think you may be due an assessment renewal and they will gladly assist you in understanding your requirements.