How do I value my property?

In the unfortunate circumstances where a building is damaged, by fire for example, it is particularly important that adequate insurance is in place to cover the cost of re-instating or rebuilding the damaged premises. This is why an accurate assessment of rebuilding costs is required so that the building owner does not receive a reduced insurance payout due to inadequate cover.

Reinstatement Value

Under the “reinstatement” basis of cover, the sum insured should be the cost of rebuilding the property at the time of loss, as opposed to at the start of the insurance period. This will most likely have increased during the year as a result of inflation in  construction costs.

It is also important to remember that inflation will continue while the reinstatement work is going on. This can be a factor if a building is particularly badly damaged as it could take months or even years to fully complete the work. The sum insured needs to make allowances for this inflation to avoid the cover 'running out' before all the work is complete.

Day one reinstatement

Under the ‘day one reinstatement basis’ method, the sum insured is the rebuilding cost on the first day of the insurance year. The insurance policy will include an inflation provision which will make sure cover remains adequate for the building.

Care should be taken to accurately set the day one declared value, or the inflation provision will apply to an incorrect figure and over time this could result in the sum insured being incorrect. Ideally a full valuation inspection by a qualified surveyor, preferably at three to five year intervals, should be completed to make sure the figure is accurate. Desktop valuations or the application of a suitable building cost index can be used when renewing the insurance in the intervening periods.

Should you have any queries or need more information on this topic, please do not hesitate to contact Tony Efreme (Property Manager) on 0207 330 8705.