Reinstatement Cost Assessments - Why?If you underinsure your insurers could reduce your claim in line with the level of underinsurance present. If a claim arises the last thing you want to find is you are not going to be fully recompensed to reinstate the damage. So for instance, if you are 33% underinsured your claim could be reduced by 33%. Your claim is for £10,000 but you would only be paid £6,666! Not a position anyone would wish to find themselves in.
Not only do you need to take into consideration the block of apartments itself but you should consider any car park areas, soft landscaping, walls, bin stores, bicycle stores, roads, underground pipes – the list goes on! You can see a list of what is defined as part of your building under your full policy wording.
The best way of ensuring you have the right declared value in place under your policy is to ensure you employ a fully qualified RICS (Royal Institution of Chartered Surveyors) valuer to undertake a reinstatement cost assessment (valuation) of your development and all items that belong to the site. Their web site can be found at www.rics.org/uk
The figure they provide to you will be your declared value and should include VAT as although new build is not subject to VAT all repairs are and in most cases when a severe claim occurs at a block of apartments it is a question of repairing the structure that remains and not rebuilding it from scratch.
Once you have your reinstatement cost assessment from the RICS valuer showing your true declared value you should ensure the figure is used immediately as the declared value under your buildings policy whether your policy is due for renewal or is part way through the year.
Although your insurers will index link your declared value year on year at renewal date, if you start with an incorrect declared value it will remain incorrect no matter how many times index linking is applied.
The reinstatement cost assessment should therefore be carried out every 3 to 5 year as recommended by the RICS to ensure it remains accurate and correctly protects your biggest asset.