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Reinstatement Cost for Insurance – Have you got the right amount of cover?

As a landlord, you are responsible to ensure that you have the correct amount of insurance for your property. Landlord insurance is calculated on the reinstatement valuation of your property. That is what it would cost to rebuild the property back to its original state. Many landlords often use their surveyors’ report for this figure. If the property has recently been bought or remortgaged this won’t be an issue. You are responsible as a landlord to ensure that your rebuild cost is correct.
 

Did you know that if you make a claim and the reinstatement cost is incorrect it could cause you a problem?

 
When you insure your assets, like a building, you must advise the insurer of the value to insure the property for. If you get this insurance value wrong and it is lower than the real reinstatement cost assessment value then you are at risk. Meaning that in an event of a claim insurers will only pay a percentage of the claim amount. This method of paying out a percentage of a claim is known as a condition of average.
 
For example, the insurance policy covering the listed buildings is based on a sum insured of £80,000.00. When a claim occurred the real insurance value was £100,000.00. The proportion of average would then be £80,000.00 or 80%. You would only receive 80% of any loss that you suffer.
 
There are various ways that property owners can calculate the insurance but the easiest way is via https://abi.bcis.co.uk/. The website will work out for you the exact residential rebuilding cost. It only takes two to three minutes to register and go through various questions to help you. You could alternatively instruct a local surveyor. Their costs are upwards of £250.00 but it is so important that you get it right.
 
You will often find that the rebuild figure is lower than what the properties market value is. This is because in real terms it is what it costs to rebuild not what it is valued at today. There are rare exceptions of when the property value is lower than the completely rebuild cost but these are market specific.
  

Affordable and professional insurance valuations

 

We have teamed up with rebuildcostassessment.com. To provide you with affordable reinstatement costs. Buildings insurance should cover the amount required to rebuild. Yet, fewer than one in ten commercial or residential properties in the UK are covered correctly.

 

If you are over-insured, you are paying too much for your building insurance. If you are under-insured, you face a reduced pay-out in the event of a claim. Insurance claims can be reduced by hundreds.

 

We are able to provide you with a comprehensive rebuild cost assessment (RCA) report guiding you on how much you should insure your building for. This is a fantastic and affordable online service. Which can protect your organization from the severe consequences of under insurance. Backed by the Royal Institute of Chartered Surveyors organization it lasts two years.

 

What is declared value and building sum insured?

 

The declared value is the value of the bricks and mortar. It covers everything fixed to the property including fitted kitchens and bathrooms from the day the policy starts. It is the most important figure. The sum insured figure is always higher than the declared value. This is to cover the cost or rise in building materials or inflation over the period of the insurance.

 

If your policy shows a building declared value and a building sum insured, then the policy itself includes an allowance for inflation. This means from the day your policy starts to the day of a potential claim it takes into account any sudden rise in inflation. Building materials and labour costs affect the declared value. So, the percentage increase in the building sum insured ensures that the building is never underinsured. Don’t be afraid of insurance terms we are here to help.

 

You need to understand that a lot of British insurers aren’t able to help with the rebuilding cost. There is a rebuilding cost calculator. But these can often be very complicated and a site visit may be needed. In respect of listed buildings, it is more than likely that you would need a chartered surveyor to attend the premises. There are a lot of articles on building cost information. But there is also BCIS rebuild cost calculator which will also be able to help you calculate your sum insured. They will list out whether it is standard construction. House types and what type of construction method was used in the property to completely rebuild it. These are all regulated by the Royal Institute of Chartered Surveyors. It is important that you get the right cover and that is why we have teamed up with the above company.

 

Summary

 
I believe that it is absolutely critical for landlords to check their landlord insurance rebuild cost. We have had one very bad experience for a landlord where he cancelled the index linking over many years. This lead to the property being underinsured. Whilst he was saving £30.00 or £40.00 each year by removing it, it came to a devastating end when the property burnt down. Due to the removal of index linking, the payout was £30,000 less than the full claim amount. I would strongly advise all landlords to check their rebuild figures using the link that we have provided above.
 
Mark Harringtons
 
Managing Director
 
www.iinsure365.co.uk
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