Toby's Take On - Reinstatement Cost Assessments

What Is a Reinstatement Cost Assessment?

A reinstatement cost assessment (RCA) provide insurance companies with the cost to rebuild a property (and grounds) after a total loss or significant damage. Factors such as materials, labour and demolition, as well as fees for professional services and compliance with current regulations are considered as part of the assessment and cost provided. A reinstatement cost assessment is crucial for ensuring adequate insurance coverage, on all types of property from residential, commercial and industrial.

Its important to note that the reinstatement cost is not the same as the market value of the property. The market value reflects what a buyer would pay, while the reinstatement cost focuses on rebuilding the structure to its original state. 

How do I know if I need a Reinstatement Cost Assessment (RCA)?

If you own or manage a property, it is likely that you need a Reinstatement Cost Assessment (RCA). Here's why:

• Insurance Coverage: An RCA is crucial for determining the right amount of building insurance you need. It estimates the cost of rebuilding your property in the event of significant damage or total loss. Without an accurate RCA, you could be underinsured.

• Compliance with Lease Agreements: If you're a landlord or a property manager, your lease agreement might require you to carry out an RCA. This is to ensure that the property is adequately insured, protecting both you and your tenants.

• Recent Changes to the Property: If you have made significant changes to your property, such as extensions or major renovations, it is a good idea to get a new RCA. These changes can significantly affect the cost of rebuilding the property.

• Market Fluctuations: The cost of building materials and labour can fluctuate over time. If it is been a few years since your last RCA, it might be time for a new one to ensure your insurance coverage is still adequate.

Who can carry out a Reinstatement Cost Assessment?

A Reinstatement Cost Assessment (RCA) should be carried out by a qualified building surveyor. A building surveyor can assess a property and determine the cost to rebuild it. 

What is the difference between a desk top RCA and an RCA requiring a site visit?

A desktop RCA is conducted from the comfort of the surveyor's desk, and is based on pre-existing information about the property. This information is typically provided by managing agents or commercial agents who are responsible for the building's management.

It is important to note that while desktop assessments can provide a good estimate, they may not be as accurate as a full on-site survey. This is because the they are reliant on the information provided by being accurate and up to date. A surveyor 'in this' type of assessment will not physically inspect the property.

An on-site RCA is conducted after a thorough survey of the property has been completed. This type of assessment is typically more accurate than a desktop assessment because the surveyor can take onsite measurements, directly observe and evaluate the property's condition, note materials used, and any unique features that may impact the reinstatement cost. This type of assessment will be more detailed and thorough as it is the surveyors own work and not reliant on 3rd party information.

During an on-site RCA, the surveyor will take into account various factors such as the property's size, construction type, architectural features, location, and any potential issues that could affect the rebuilding cost.

Once the survey is complete, the surveyor will compile a detailed report outlining the estimated cost to reinstate the property in the event of a total loss. This report can then be used for insurance purposes to ensure the property is adequately covered.

How frequently does a Reinstatement Cost Assessment need to be carried out?

A full RCA, should be carried out every three years and completed on a property whenever there are significant changes to the building, such as extensions or alterations to reflect the updated rebuild cost.

A desktop review of the latest full RCA can be completed on an annual basis to make adjustments particularly for managing budgets and to account for factors such as inflation and changes in material and labour costs ensuring ongoing adequate insurance coverage. 

How much does a Reinstatement Cost Assessment cost?

The cost of a RCA will depend on what type of assessment is being conducted either on-site or desk top. The size of the property being assessed, where the property is located, the number of blocks to be assessed, whether it is of listed status or is in a conservation area, are there cellars or basements and any other abnormal non-traditional features will all contribute to the overall cost of an RCA.

As there are several factors that will influence the cost of a RCA, contacting your building surveyor for a quotation is the best option. They can provide a detailed breakdown of the different types of RCAs you might need, whether for residential blocks or commercial premises and help you understand the costs associated with both desktop and on-site assessments.

They will be able to explain the benefits and potential drawbacks of each, helping you make an informed decision. They can help you understand how the assessment is conducted, what information is considered, and how the reinstatement cost is calculated. This can give you a clearer picture of the potential costs involved and help you plan your budget more effectively.

My insurance company provide a free RCA with my policy why should I pay for one?

Insurance companies may offer a "free" RCA as part of the properties insurance policy. While this might seem like a convenient option, it is important to remember that these assessments may not always provide the most accurate estimate. Since they are based on previous assessments, policies, or third-party information, they might not take into account recent changes to the property or current market conditions.

Moreover, there is a potential conflict of interest as the insurance company conducting the assessment might overestimate the cost to rebuild. This could lead to higher insurance premiums, making the "free" RCA not so free after all!

It is always a good idea to consider getting an independent RCA from a professional surveyor. They can provide an impartial and accurate assessment, ensuring you are not overpaying for your insurance coverage.