Reinstatement Cost Assessment

Question 1

What is a reinstatement cost assessment and what is the purpose of a reinstatement cost assessment?

Answer 1

• An assessment to determine the declared value of a property, which is the total cost to rebuild a property following total loss or substantial damage that the entire building would require demolition and rebuilding.
• Undertaken for insurance purposes to determine the sum insured for building insurance, normally on a day one reinstatement basis.

Question 2

What is meant by ‘day one reinstatement’ basis?

Answer 2

• Insurance cover whereby the sum insured is calculated using the declared value and inflation provision.
• The declared value should be the equivalent to the lump sum competitive tender submitted by a competent contractor for works to commence on the first day of the insurance policy.
• The inflation provision is a percentage uplift to cover likely inflation for the period of the policy (normally between 15% - 50%).

Question 3

How would you go about calculating the declared value?

Answer 3

• Net rebuilding cost calculated by multiplying the gross internal area of the building by a suitable rate for its reconstruction. Rates for reconstruction obtained from the BCIS or in-house costings for similar projects.
• External areas or additional structures.
• Access restrictions such as sloping sites or pedestrianised areas.
• Adjustment for location. Rate obtained from BCIS.
• Debris removal, demolition or temporary support such as party walls or hazardous materials etc.
• Account for statutory fees such as listed building or conservation area application fees.
• Account for professional fees such as contract administrator, principal designer and project manager.