Insurance rebuild costs

[MD]

I have just had my house valued for mortgage purposes. I noticed that the surveyor has made recommendation as to rebuild costs for insurance purposes. The figure he suggests is about £100,000 more than the houses market value. This is a timber-framed house, grade two listed.

I know that rebuild costs are likely to b higher than for a 'normal' house, but I'm still a bit surprised that it would cost more than the market value, when rebuild costs of a modern house are usually a lot less than the market value.

Do you think this is likely to be correct? I find estimating rebuild costs to be very difficult - does anyone have any suggestions?

 

[Nemesis]

Oooh - didn't we have a long thread about all this valuation stuff a while ago?

 

[ljn]

The rebuild cost for my house is more than twice its value. I am told his is because it is listed and if part of it bured down, it would have to be rebuilt using traditional materials and methods. Having been quoted £30.000 to re-slate the roof and replace the leadwork, the high insurance makes sense.

 

[Lime]

Oooh - didn't we have a long thread about all this valuation stuff a while ago?

Sure did:

http://periodpropertyshop.co.uk/phpBB2/viewtopic.php?t=7516

 

[skier-hughes]

Ours is insured for 3x it's purchase price... same reasons - materials, finding them etc.

 

[Schoolmarm]

thanks for that link, did anyone ever find out if the square meter total was for the footprint or for all the floors totalled up?

 

[MD]

thanks for that link, did anyone ever find out if the square meter total was for the footprint or for all the floors totalled up?

I as going to ask the same question as Schoolmarm!

Thanks for the link - it was interesting reading, but I'm not sure I'm any the wiser now!

I can't imagine it could cost 2 or 3 times the purchase price to rebuild my house - appart from the timber frame, there are not many 'original features' left!

I have sent an email to the insurance brokers that I used (Bruford&Vallance - they are supposed to specialise in historic buildings) asking them for their opinion and advice.

 

[skier-hughes]

Ok, after finding timbers to match of the correct size etc to rebuild your house, you aren't going to get Bob the Builder to put it up are you, you now need a specialist timber frame man to come and build your dwelling, then your lime plasterer etc.

Think on how much it costs you to do those ongoing repairs, then think on how much it would cost to do the whole house.

How long is it going to take to do this?
The same as a New build?
twice as long?
How long will they be putting you up in a rented house?

 

[Pford75]

thanks for that link, did anyone ever find out if the square meter total was for the footprint or for all the floors totalled up?

Having just had our cover 'reassessed' (read increased) by the loss adjuster following a large claim, ours was assessed on the basis of footprint.

I can't imagine it could cost 2 or 3 times the purchase price to rebuild my house

Don't forget that the insurance also has to include for demolition, site clearance etc...before a rebuild could begin. Plus professional fees etc. etc.

Believe me....I would strongly advise anyone with any concerns to have their insurer provide the rebuild cost.

 

[MD]

I had quite a long chat with the chap at the Insurance Brokers. But basically he seemed to be saying it was a 'finger in the air job'! He certainly wasn't going to commit himself to any reccomendations!

I guess I just have to get on to the insurers themselves and see what they say.

Also, it seems to me that it would be impossible to rebuild these houses as they were - once they are gone they are gone. And would conservation insist you put things back as they should of been, not as they were (that is, if all your wattle and daub and lime render had been skipped long ago, would they insist that this went back again?).

Bit of a mind-field this, isn't it?

 

[JMartin]

I don't know if it's possible to get this sort of insurance on your property but when we were insured with Sainsbury's Bank last year they offered unlimited rebuild insurance as standard. I checked and double checked and yes, if the building fell down they would rebuild it at any cost. Ours is a standard solid walled brick built semi...not listed.

With Sainsbury's they were happy to insure with our structural problems and the price and caveats seemed fair...basically they wouldn't insure for anything we already knew was wrong so if the front of the house fell off tough because we knew it was unstable. They also wouldn't insure builders or their tools (I think standard) and the accidental damage while doing DIY cover was denied...surprise!

We didn't reinsure with them because the price was steep after we sorted the main structural issues.

 

[MD]

Thanks JMartin - certainly something worth loking into. Mind you, they may use the damp, beetle damage, leaning walls etc often found in old houses as a sign of 'faults' you knew existed!

 

[Stephen]

If the assessment is undertaken at a basic level (an amount per square metre) then yes it is the footprint of the whole house. This means taking the floor area (measured externally) of each and every floor and dding together to get the total floor area

However, attics and cellars are not usually taken at full rate and anything above two storeys usually ahs a reduced rte for upper floors (on the basis that it does not add the whole cost again for each floor).

It is not a finger in the air job if you know what you are dealing with. However, the figures to use are not readily available and for those who do not deal with such property on a regular basis it may be a lot more guesswork.

I supose one slight consolation in all this is that if ever you have a laim the loss adjuster is facing the smae problem you face in working out whether the property is adequately insured.

To deal with other points.

Do not even begin to equate the market value with rebuild cost. With a new property there may be reasonably close crrelation but even then it does not follow. Yes, some properties can cost several times the market value to rebuild.

If a historic building were to be totally destroyed (or a significant proportion) you probably would not put back a replica. However, such scenarios are rare. The cost of repairing a building is higher than starting from scratch. Within the professions there has been much debate about this. The conclusionis that it is far better to assess rebuild cost on the basis of assumed total destruction but using like for like materials. This may result in a far higher figure than assuming rebuild of a new house in its place. Nonetheless, at least such a figure should be sufficient to allow for any evenuality.

There have been cases of historic houses being insured on the basis of rebuilding a new house. They suffered a partial loss and the cost of epair was greater than the cost of building new - they were therefore under-insured.

We could debate the rights and wrongs of the system, but as it stands for most owners of historic buildings the best thing is to assess the rebuild cost of the whole house using traditional like for like materials and accept that the resulting figure will be high.

 

[skier-hughes]

There have been cases of historic houses being insured on the basis of rebuilding a new house. They suffered a partial loss and the cost of epair was greater than the cost of building new - they were therefore under-insured.

This was our insurers reason, if half the house was destroyed by fire, you'd want it to be replaced like for like and as such the whole house needed to be covered on the same basis to give you adequate insurance cover.

 

[Flyfisher]

I supose one slight consolation in all this is that if ever you have a laim the loss adjuster is facing the smae problem you face in working out whether the property is adequately insured.

Only a very slight consolation though, as the loss adjuster is not facing any of the financial consequences of being deemed to be under-insured.

While not dismissing the valuation difficulties associated with period properties, I do think it is outrageous, fraudulent even, than an insurance company will accept your own entirely non-expert amateur estimates for the purposes of taking your premiums but will then appoint their own expert professional loss-adjuster when it comes to any claim.

If they are happy to rely on my figures then they should happy to pay out the amount insured. If the amount insured doesn't cover the rebuild then that's my fault and my loss, but I shouldn't be further penalised by the insurance co reducing my claim by some proportion because they now decide I'm under-insured.

 

[MD]

It seems the only way to have peace of mind is to have the company you are insured with give you a valuation. Even then, they will probably charge you a fortune to do this. It would also be in their interests to value high (higher valuation = higher premium costs).

 

[skier-hughes]

Our surveyor gave us the rebuild costs, so included in the survey price, and apart from the fact that lots of insurers wouldn't touch us because of the value, the premium we pay was quite low to what we thought we'd have to pay.