December 18, 2024
The costs to rebuild commercial properties have surged dramatically in recent years, far outpacing general inflation. The reality? Many commercial property owners are significantly underinsured – in some cases by as much as 50% – and they may not even know it.
Imagine suffering a fire or some other devastating incident and discovering your insurance payout only covers half the cost of rebuilding your property. It’s a scenario more common than you might think, and one that can have catastrophic financial consequences for businesses and property owners.
This is why making sure your property’s rebuild value is accurate and up to date is essential. A Reinstatement Cost Assessment (RCA) – a professional evaluation of your property’s true rebuilding cost – can ensure you are fully protected and avoid the hidden risk of underinsurance.
In this article, we’ll explore what “reinstatement” means in terms of insurance, the risks of underinsurance, and how an RCA can help safeguard your business.
What is “reinstatement” and why does it matter?
In insurance terms, “reinstatement” is the cost of rebuilding your property to its original condition if it’s completely destroyed, whether by fire, flood, or another disaster.
It’s not just about bricks and mortar; it includes everything needed to demolish and clear the remains and then restore the property, including materials, labour, professional fees and compliance with current regulations.
Getting the reinstatement value right is crucial. If your property’s insured value is too low, your insurance payout won’t cover the full cost of rebuilding. This could leave you having to make up the difference – a financial hit that could seriously impact your business.
The bottom line? Accurate reinstatement values give you peace of mind that, if the worst happens, you’re fully covered and won’t face a costly shortfall.
What is underinsurance?
Underinsurance happens when your property is insured for less than its actual rebuild cost. It’s more common than you might think, often due to outdated valuations or the rising costs of materials and labour.
Many building owners set their cover years ago and haven’t revisited it, leaving them unknowingly exposed.
The consequences can be severe. Say your property is insured for £900,000, but a current rebuild valuation should actually be £1,800,000. If you suffer £150,000 worth of damage, your insurer may only cover 50% of that, because you’re only insured for 50% of the true value. That means you’d receive just £75,000, leaving you to cover the remaining £75,000 yourself.
Underinsurance doesn’t just affect big claims; it impacts every claim. Without the right cover, you could risk a serious financial shortfall when you need it most, leaving you liable for the remainder of the rebuild costs.
FACT: 9 out of 10 properties in the UK are incorrectly insured and, on average, buildings are covered for just 68% of the amount they should be. This leaves property owners dangerously exposed in the event of a claim.
The role of a Reinstatement Cost Assessment (RCA)
A Reinstatement Cost Assessment (RCA) is a professional, desktop evaluation of how much it would cost to completely rebuild your property if it were destroyed.
The resulting figure is known as the “Buildings Declared Value” (BDV), which is the amount your property should be insured for at the time of policy commencement or renewal. The BDV includes the cost of reinstatement (labour and materials), demolition costs and debris removal, professional fees, and compliance with current regulations.
Why is an RCA necessary? Because calculating the BDV isn’t straightforward.
Factors like changing construction costs, new regulations, and property features can make accurate valuations complex. Without an RCA, you risk underestimating your rebuild cost, and that can lead to underinsurance.
Unlike traditional onsite surveys, desktop evaluations are faster, more convenient, and more affordable. They typically take just 5 to 10 working days to complete, and the cost is minimal, typically coming in at under £200.
To stay protected, it’s generally recommended by the Royal Institute of Chartered Surveyors (RICS) to carry out an RCA every 3-5 years. If you’ve made significant changes to your property, like extensions or refurbishments, you should get an updated assessment sooner.
An RCA ensures your insurance cover keeps pace with reality, giving you confidence that your property is fully protected.
RCAs from Robert Gerrard – how it works
At Robert Gerrard, we partner with RebuildCostASSESSMENT.com to offer a reliable and affordable desktop Reinstatement Cost Assessment service. This service is provided by a RICS-regulated organisation and delivers a comprehensive RCA report within 5 to 10 working days.
For just £170, you’ll get a professional evaluation that ensures your building is insured for the right amount. No onsite visits are needed, making it quick, hassle-free, and convenient.
In the event of a claim, having the correct rebuild value can mean the difference between full compensation and a reduced payout.
In summary – how to protect your property from the costly risks of underinsurance
Here are the key steps every business owner should take to avoid underinsurance and stay fully protected:
- Arrange a Reinstatement Cost Assessment (RCA) – Obtain a professional evaluation of your property’s rebuild cost to ensure your insurance reflects the true value.
- Review your cover regularly – Rebuild costs can rise quickly. Make it a habit to review your cover every 3-5 years, or sooner if you make changes to your property.
- Consult your broker – Work closely with your insurance broker to make sure your policy is up to date and provides adequate protection.
Your important next steps – are you adequately covered in terms of buildings insurance?
Underinsurance is a hidden risk that can have serious financial consequences. By arranging a straightforward, desktop-based Reinstatement Cost Assessment, regularly reviewing your cover, and working with your broker, you can ensure your property is properly protected.
At Robert Gerrard, we’re committed to helping our clients avoid the devastating consequences of underinsurance. We’ll guide you through the process, helping you arrange RCAs, and ensuring you have the right, tailor-made cover in place.
We’re here to help you safeguard your business. Don’t leave your property’s protection to chance. Talk to us today and let’s make sure you’re fully covered.
Share This Story, Choose Your Platform!
The costs to rebuild commercial properties have surged dramatically in recent years, far outpacing general inflation. The reality? Many commercial property owners are significantly underinsured – in some cases by as much as 50% – and they may not even know it.
Imagine suffering a fire or some other devastating incident and discovering your insurance payout only covers half the cost of rebuilding your property. It’s a scenario more common than you might think, and one that can have catastrophic financial consequences for businesses and property owners.
This is why making sure your property’s rebuild value is accurate and up to date is essential. A Reinstatement Cost Assessment (RCA) – a professional evaluation of your property’s true rebuilding cost – can ensure you are fully protected and avoid the hidden risk of underinsurance.
In this article, we’ll explore what “reinstatement” means in terms of insurance, the risks of underinsurance, and how an RCA can help safeguard your business.
What is “reinstatement” and why does it matter?
In insurance terms, “reinstatement” is the cost of rebuilding your property to its original condition if it’s completely destroyed, whether by fire, flood, or another disaster.
It’s not just about bricks and mortar; it includes everything needed to demolish and clear the remains and then restore the property, including materials, labour, professional fees and compliance with current regulations.
Getting the reinstatement value right is crucial. If your property’s insured value is too low, your insurance payout won’t cover the full cost of rebuilding. This could leave you having to make up the difference – a financial hit that could seriously impact your business.
The bottom line? Accurate reinstatement values give you peace of mind that, if the worst happens, you’re fully covered and won’t face a costly shortfall.
What is underinsurance?
Underinsurance happens when your property is insured for less than its actual rebuild cost. It’s more common than you might think, often due to outdated valuations or the rising costs of materials and labour.
Many building owners set their cover years ago and haven’t revisited it, leaving them unknowingly exposed.
The consequences can be severe. Say your property is insured for £900,000, but a current rebuild valuation should actually be £1,800,000. If you suffer £150,000 worth of damage, your insurer may only cover 50% of that, because you’re only insured for 50% of the true value. That means you’d receive just £75,000, leaving you to cover the remaining £75,000 yourself.
Underinsurance doesn’t just affect big claims; it impacts every claim. Without the right cover, you could risk a serious financial shortfall when you need it most, leaving you liable for the remainder of the rebuild costs.
FACT: 9 out of 10 properties in the UK are incorrectly insured and, on average, buildings are covered for just 68% of the amount they should be. This leaves property owners dangerously exposed in the event of a claim.
The role of a Reinstatement Cost Assessment (RCA)
A Reinstatement Cost Assessment (RCA) is a professional, desktop evaluation of how much it would cost to completely rebuild your property if it were destroyed.
The resulting figure is known as the “Buildings Declared Value” (BDV), which is the amount your property should be insured for at the time of policy commencement or renewal. The BDV includes the cost of reinstatement (labour and materials), demolition costs and debris removal, professional fees, and compliance with current regulations.
Why is an RCA necessary? Because calculating the BDV isn’t straightforward.
Factors like changing construction costs, new regulations, and property features can make accurate valuations complex. Without an RCA, you risk underestimating your rebuild cost, and that can lead to underinsurance.
Unlike traditional onsite surveys, desktop evaluations are faster, more convenient, and more affordable. They typically take just 5 to 10 working days to complete, and the cost is minimal, typically coming in at under £200.
To stay protected, it’s generally recommended by the Royal Institute of Chartered Surveyors (RICS) to carry out an RCA every 3-5 years. If you’ve made significant changes to your property, like extensions or refurbishments, you should get an updated assessment sooner.
An RCA ensures your insurance cover keeps pace with reality, giving you confidence that your property is fully protected.
RCAs from Robert Gerrard – how it works
At Robert Gerrard, we partner with RebuildCostASSESSMENT.com to offer a reliable and affordable desktop Reinstatement Cost Assessment service. This service is provided by a RICS-regulated organisation and delivers a comprehensive RCA report within 5 to 10 working days.
For just £170, you’ll get a professional evaluation that ensures your building is insured for the right amount. No onsite visits are needed, making it quick, hassle-free, and convenient.
In the event of a claim, having the correct rebuild value can mean the difference between full compensation and a reduced payout.
In summary – how to protect your property from the costly risks of underinsurance
Here are the key steps every business owner should take to avoid underinsurance and stay fully protected:
- Arrange a Reinstatement Cost Assessment (RCA) – Obtain a professional evaluation of your property’s rebuild cost to ensure your insurance reflects the true value.
- Review your cover regularly – Rebuild costs can rise quickly. Make it a habit to review your cover every 3-5 years, or sooner if you make changes to your property.
- Consult your broker – Work closely with your insurance broker to make sure your policy is up to date and provides adequate protection.
Your important next steps – are you adequately covered in terms of buildings insurance?
Underinsurance is a hidden risk that can have serious financial consequences. By arranging a straightforward, desktop-based Reinstatement Cost Assessment, regularly reviewing your cover, and working with your broker, you can ensure your property is properly protected.
At Robert Gerrard, we’re committed to helping our clients avoid the devastating consequences of underinsurance. We’ll guide you through the process, helping you arrange RCAs, and ensuring you have the right, tailor-made cover in place.
We’re here to help you safeguard your business. Don’t leave your property’s protection to chance. Talk to us today and let’s make sure you’re fully covered.