Brokers Ireland Affinity Partner
Research shows us that over 85% of properties aren’t insured for the correct amount. As an insurance broker, you should avoid guessing the Sum Insured and gambling with your client’s insurance policy.
You can now reduce the risk of under-insurance and differentiate yourself from your competitors by having the property reinstatment cost professionally assessed.
And what’s more … your insurers and your clients will thank you for it.
Reinstatement cost assessment is the process of estimating the cost of rebuilding a property if it was to be destroyed or damaged by fire, storm, flood or any other peril.
This assessment takes into account factors such as the cost of labour, construction materials, demolition, professional fees and any special considerations, such as historic preservation or reinstatement having to satisfy current building regulations.
Insurance can be complicated. After all, it’s a contract, and contracts are always full of conditions and clauses.
When it comes to insuring your building, there’s one clause you need to know about because this clause can cause significant problems if you ever need to make a claim.
It’s called THE AVERAGE CLAUSE, and put simply; it means if you insure your building for an amount that’s too low, your insurer can reduce how much they’ll pay out. It’s your insurer’s way of ensuring you only get what you pay for.
Reinstatment Cost Assessment is very different from the Property Market Value. Real Estate price is driven by what the market is prepared to pay based on the property location, neighbourhood, age, condition, age, energy efficiency, personal aesthetics and perception of value.
This is especially true for residential properties. The Market value can be fairly accurately assessed in a couple of minutes by an experienced Real Estate Agent. As the Estate Agent hopes to get a listing, it is usually provided free of charge.
Determining the market value of a commercial property is slightly more complicated as the value can be determined in a number of ways, depending on the type of property and your specific perspective e.g. on the cost basis, by comparing sales value of similar properties in the area, by considering rental income potential and a number of other methods.
Reinstatement Cost Assessments, on the other hand, are based on hard replacement costs – the cost of construction materials and the estimated cost of labour, not just to re-instate the property to the pre-loss condition, but to rebuild the property in line with the current building regulations and standards.
In other words, the building constructed in 1970 and destroyed in 2023 will have to be reinstated to 2023 building regulations and current standards.
Therefore, a RICS Chartered Surveyor is always best placed to perform a reinstatement cost assessment, preferably someone with building insurance claims experience who would know and understand the implications of the Average clause.