Accurate Assessements Costs for Rebuilding properties
Property owners must include a provision for reinstatement cost in their financial forecasts in the event of a total loss of a building which occurs as the result of an insured peril. A requirement of most insurers and underwriters, calculating the reinstatement value will ensure that they are protected from future financial risk. It will also form the basis for insurance premiums to be set or adjusted and is recommended to be reviewed every three years to ensure an up to date valuation.
Cardoe Martin provides this service for commercial and residential clients on properties ranging from private dwellings to large scale commercial units and major developments. The majority of our clients instruct us to inspect their portfolio on a cyclical basis. In conjunction with our inspection, measurements and assessment of the construction and property records, we
The following points will need to be considered when setting the current reinstatement cost:
- Demolition and the removal of debris including dangerous materials
- The cost of rebuilding
- Professional and statutory fees,
- Historic or listed buildings which require
specialisedmaterials and craftsmanship Locationsuch as city centresites requiring road closures or alterations to public transport routes
- Restrictions to access of large scale machinery
FREQUENTLY ASKED QUESTIONS
What is a building reinstatement cost assessment (“BRCA”)?
A BRCA is the calculation of the total sum to be paid to cover the demolition and subsequent rebuilding of a property following a total loss, as a result of an insured peril.
How does it differ from a fire insurance valuation?
They are effectively the same. The Royal Institute of Chartered Surveyors (RICS) changed the name to reflect the fact that the majority of building insurances extend to cover many perils, as well as fire.
What is the declared value and how does it differ from the sum insured?
The declared value is the cost of rebuilding and all associated costs at commencement of the policy. It includes the cost of construction (on a fixed price, lump sum basis obtained under competitive tender), together with allowances for demolition of the existing building, removal of the debris therefrom and all associated professional and statutory fees applicable to the works. It does not include an allowance for inflation during the term of the policy, however this is typically provided within the ‘Buildings Sum Insured’ under most buildings policies. You will need to check your own policy to see if this applies.
Does the building reinstatement cost influence market value/selling price?
The BRCA is purely for insurance purposes and does not affect the sale price or market value of your property.
Why is a BRCA necessary?
RICS recommend that a BRCA is undertaken every three years to maintain an up to date declared value. A BRCA is necessary to ensure all factors that may affect the declared value are considered and included. Should underinsurance occur, insurers may reduce claims payments made, even for a partial loss (this is called Average). Any shortfall would need to be made up by you as the insured.