Buildings Insurance - Calculations : Long Post - Help req'd

[Stephen]

I don't have time to read all the posts or to gi ve a detailed reply.

At present the only guide available to surveyors is the BCIS guide, which is for properties post 1900.

For historic buildings when we are asked to work out rebuild costs we generally start from £1,600 psm, often use at least £1,800 psm and sometimes more. It depends bon the property type, etc, etc.

The figures we use are based on our experienc eof repair and rebuild costs from projecgts we are involved wigth. We check them against project costs periodically. It is not a very robust system we have an could be criticised, but is better than using the BCIS guide inappropriately.

I suspect the original figures was based on a BCIS guide with no adjustment, etc. I therefore believe your loss adjustor is correct and the original surveyor wrong. Without more time and/or details that is the best I can do for now.

Stephen

 

[Pford75]

Thanks for all of the responses on the cost per sq. metre. I think from what everyone is saying, the figure of 1600/ sq.m is not unreasonable and then (assuming the sizes are correct) the calculation by the loss adjuster is in the right ball park.

So, given the comments about underinsurance and the risk that the loss adjusters try to reduce my claim proportionally - what (if any) comeback do I have against the original survey which gave an insurance reinstatement figure which was so wrong?

It's not like we have deliberately underinsured, we simply took the advice of a professional and insured for that figure. If they do attempt to reduce the claim, would we have a case against the surveyor?

 

[AMc]

Though it's little consolation, this would have been much more painful if you'd been looking at a "total loss" i.e. no house and a big argument about rebuilding costs would not be nice. I wondered why our reinstatement estimate was greater than the purchase price and now I know!

If I were you I would stick to your guns for the full cost of the latest claim as you acted on the best professional information available and the insurance co. never suggested you were underinsured. If anything their decision not to assess the property before agreeing to insure should put some onus on them to pay up in full this time. I assume you told them the age of the property and the market value? But you will probably have to agree to an increase in the insured sum in light of the new assessment for future renewals.

In the end I doubt either you or they have a watertight case, simply a difference of opinion. If they want your future custom they'll pay the claim and up your preimum. If not then look for a new provider and talk to the CAB.

 

[Lime]

Thanks for all of the responses on the cost per sq. metre. I think from what everyone is saying, the figure of 1600/ sq.m is not unreasonable and then (assuming the sizes are correct) the calculation by the loss adjuster is in the right ball park.

So, given the comments about underinsurance and the risk that the loss adjusters try to reduce my claim proportionally - what (if any) comeback do I have against the original survey which gave an insurance reinstatement figure which was so wrong?

It's not like we have deliberately underinsured, we simply took the advice of a professional and insured for that figure. If they do attempt to reduce the claim, would we have a case against the surveyor?

30 years ago I had a similar problem with an insurance claim where they offered a reduced payment.

I wrote a full explanation to the insurance company telling them how the initial insured figure was arrived at.
I explained that I had been careful to select reputable builders to make a quotation and had chosen the lowest thus saving them money.
I asked them to reconsider their decision to reduce the payment and if they considered my behaviour unreasonable.

They paid in full.

 

[Flyfisher]

. . . and if that doesn't work there's always the insurance ombudsman - but let's hope it doesn't come to that.

 

[Pford75]

Well, after all the helpful advice, I thought i'd better update you all on progress.

Following the initial advice that the rebuild cost per sq.m. was not unreasonable, I contacted my insurers and said that I was as keen as them to ensure I am adequately insured, but my current policy was based upon my own surveyors report...so what's to stop them disputing another of my surveyors reports? After some discussion, they have agreed to meet the cost of a survey and that they will accept this as the full reinstatement value required. So, I'm expecting the total to go up and result in an increase in premiums.

I followed up with another email pointing out my existing claim and the fact that I had insured in good faith, but was concerned about a reduction in the current claim. They wrote back this evening

"I can confirm that I have spoken to our claims department who have advised that your current claim will not be affected by this"

So - In general a good result (albeit with higher premiums to come). Thanks to everyone who posted. Just goes to show that you too may be in the same position......it would certainly make me think before purchasing buildings cover on a period property in the future.

Also like to say that the brokers (Aon) and the insurers (Brit) have been very reasonable and responsive throughout - credit where it's due.

Thanks all - have a good weekend

 

[Penners]

Imagine you own a £1m property - very nice until you retire and can no longer afford the premiums for £1m of insurance. So, you decide to take a risk and insure it for, say, £250k on the basis that if the place does burn down you can take the money and at least buy a smaller place to live out your retirement. What's wrong with wanting to do that?

As Antwerpman said above, it's not the total loss scenario that principally governs the insurers' attitude to this. Yes, if your £1m house (covered for £250k) burns down, you'll get £250k.

But, under your principle, if the roof blows off, and the repairs cost £50k, you're going to expect the insurers to pay the full £50k. They will argue that an undervaluation of 75% applies to all the risks associated with the property - not just a total loss.

And they'll give you £12.5k.

 

[Penners]

I can confirm that the current newbuild cost for an average house is £1200/m²

John - is the footprint measured on the internal dimensions of the house, or external?

 

[Flyfisher]

I've been looking into this and was recently told it's the outside dimensions that count.

 

[Flyfisher]

But, under your principle, if the roof blows off, and the repairs cost £50k, you're going to expect the insurers to pay the full £50k. They will argue that an undervaluation of 75% applies to all the risks associated with the property - not just a total loss.

And they'll give you £12.5k.

Yes, I understand that's what they do but I'm curious about why they do it (apart from the cynical 'because they can' answer). If I'm paying for £x amount of risk surely I ought to be able to claim for anything under that risk up to £x ? Or maybe I should get a refund on my premiums on the basis that they will only ever pay out a proportion of any claim. They can't have it both ways - can they?

AMc's example of a larger house being a bigger risk is the only suggestion that anyone has made towards the 'why'. It's certainly plausible in some scenarios but I'm not entirely convinced.

I suspect it's an arbitrary thing. It's the way it just is.

 

[skier-hughes]

I suspect if your house is worth £1m and you insure for £250,000, a 1/4 of the value, they see it as they are insuring every item to a 1/4 of it's value, so you have a leaky roof due to storm damage, you have only insured 1/4 of the roof, so give you a 1/4 of the value.

 

[Pford75]

John - is the footprint measured on the internal dimensions of the house, or external?

I had also understood from my discussions with the insurers that it is the external footprint. Silly question really, but is it total floor area? ie. Do you multiply by the number of floors? Not easy when you have a house on multiple different levels - At last count, we have cellars on 2 levels, 3 floors and two different attics - one of which is habitable. So the floor area calc'n is not simple.

I'll post again when we have the survey and let you all know how it goes....It will be interesting to see what the final £/sq.m figure is

 

[Flyfisher]

I suspect if your house is worth £1m and you insure for £250,000, a 1/4 of the value, they see it as they are insuring every item to a 1/4 of it's value, so you have a leaky roof due to storm damage, you have only insured 1/4 of the roof, so give you a 1/4 of the value.

But what if I just want to insure for up to £250k of damage, regardless of the house value?

I can insure my life for any arbitrary amount; the higher the amount, the higher the premium (fair enough). If I died they would just pay out the amount insured, not start arguing that I was worth more and was therefore under-insured so they will only pay out a proportion.

Anyway, I think the words 'horse', 'flogging' and 'dead' are becoming appropriate to this topic. My apologies.

 

[DaveBrigg]

Under insurance becomes more of a problem when it's linked to a mortgage. We recently had a valuation done on our partly renovated house, where I was able to give the surveyor a tour while we chatted about the work in progress. The valuation just happened to be exactly the same as the purchase price added to the cost so far of repairs, but the insurance rebuild cost was nearly £100,000 more. The new mortgage company phoned to make sure that we were aware of this. I think we are covered, but in a worst case scenario I can't imagine planning permission for the plot being granted only on condition that we use 400 yr old bricks, lime, reclaimed medieval timbers etc.
Stephen mentions costings being based on actual cases, but has anyone had experience of a Grade II property needing to be rebuilt at a cost exceeding its market value?

 

[Moo]

a Grade II property needing to be rebuilt at a cost exceeding its market value?

I'd be grateful if someone could give a definitive opinion on this point. A long time ago someone told me that the costs involved in demolition and site clearance should be added to the market value. Were they right?

 

[Lime]

a Grade II property needing to be rebuilt at a cost exceeding its market value?

I'd be grateful if someone could give a definitive opinion on this point. A long time ago someone told me that the costs involved in demolition and site clearance should be added to the market value. Were they right?

For insurance purposes the insured amount should include the costs of demolition and site clearance and the cost of building a NEW building similar to that insured.
It has nothing whatever to do with market value.

 

[Penners]

OK, following on from that, this question has occurred to me.

It's obvious that you can't rebuild a period property as such. Once the historic fabric is gone, it's gone. You could build a pastiche, but is that what's wanted?

My question to anyone who knows is this: what happens if a listed building is accidentally destroyed - by fire perhaps? Will the planners insist that a building as nearly identical to the original as possible is built? Is the listing defunct if the building has gone?

My own house, for example, consists of an C18th oak timberframe core, with a single-storey masonry side addition (once the village shop) and a 1990's masonry wing. Would I have to rebuild in exactly the same style and materials? Can the planners insist on this?

Does anyone know?

 

[skier-hughes]

[But what if I just want to insure for up to £250k of damage, regardless of the house value?

I can insure my life for any arbitrary amount; the higher the amount, the higher the premium (fair enough). If I died they would just pay out the amount insured, not start arguing that I was worth more and was therefore under-insured so they will only pay out a proportion.

Anyway, I think the words 'horse', 'flogging' and 'dead' are becoming appropriate to this topic. My apologies.

I think so But what you want is probably more commercial type insurance rather than domestic house insurance which is prety set in it's terms.
I'm sure it could be done, but expect to pay more in comparison for it as their risk is compatively higher.

 

[Nemesis]

I think in the case of total accidental loss you could apply for delisting and get it. In other cases I think that it would be taken on the merits of what is left.

What the insurers would pay out for is another matter, but it would be for some sort of rebuild.


http://www.city.ac.uk/news/archive/2006/07_july/11072006_1.html

 

[Lime]

Surely the point is that ordinary (and cheap) house insurance is weighed against older houses and the owner is penalised.

If you own a modern house you often pay less because they are smaller and *new*.
If there is a total loss you get a brand new replacement....Exactly what is wanted.

If you own an older house you often pay much more because of the size.
If there is a total loss you don't get the replacement you wish for....Exactly what is not wanted.

There was a saying years ago (it died out in the 60s) that went something like, "if you didn't like someone you left them a row of houses in your will".
Meaning the houses were worthless, they were filled with troublesome tenants you couldn't get out, they would cost a fortune to demolish meanwhile you had to pay tax on them.

The only people who profited buying old houses in those days were those that had a total loss in a mysterious fire.

What has changed since then is market value.
Insurance is still the same and driven by mortgage lenders to cover themselves.