Good morning fellow period property owners. I have an ancient stone thatched grade II listed cottage. Insurers need to know the rebuild cost. The BICS rules of thumb won't apply. Until now I have stated the rebuild cost to be a good deal higher than the sale value of the property, to be on the safe side. But I am wondering if I should reduce the rebuild cost to below the sale value, in case I am overpaying on insurance premiums. Does anyone know of any guidance or rules of thumb that might apply in my case (stone construction, ancient, thatched, detached, listed) ? On a standard house, the rebuild cost is lower than the sale value, one might think this could be more so for a stone cottage because the walls won't burn, but I may be wrong, and there will be the need to use the olden days construction techniques in the rebuild etc etc. Thanks, all.
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Rebuild Cost
- Thread starter shobo
- Start date
Flyfisher
Member
- Messages
- 10,168
- Location
- Norfolk, UK
Bit of an old chestnut this one, or a minefield, or something like that.
Here's a recent topic on this subject: https://www.periodproperty.co.uk/forum/viewtopic.php?f=1&t=16576
It rambles about a bit, as most tend to do, but it should be of interest.
A few things to consider:
1. Is the property listed? If so, the worst case scenario might be that it half burns down and then requires extensive, expensive restoration. If it is totally destroyed then it's really into new build territory, which might not be so costsly - though much will depend on the CO
2. If it's not listed then the same applies except YOU will be able to decide how to repair/rebuild and not be dependent on a 3rd party (within basic planning rules of course)
3. Will the insurance company penalise you for under-estimating the rebuild value? In this scenario, say the rebuild is valued at £100k, house is totally destroyed and the insurance company decides it will cost £200k to rebuild, but because they deem that the house was 50% under-insured they will only pay out for 50% of the insured value, i.e. £50k. This scenario penalises the non-expert property owner and encourages them to over-estimate the rebuild value to give them a safety margin.
4. If the insurance company will not penalise you for under-estimating the rebuild value then one option is to just decide how much you'd like to receive in the case of a total loss. Eg. say the property is worth £100k, you might guess a rebuild value of £200k safe in the knowledge that this amount would not leave you homeless in case of a total loss. If the actual rebuild turned out to be £150k then you're fully covered but if it turned out to be £250k then you wouldn't be fully covered but at least £200k wouldn't leave you homeless. Note that you can't really state a rebuild value of, say, £1m then burn the place down to claim the money because insurance companies generally don't allow 'betterment' - ie you shouldn't end up better off after a claim.
5. If you really want an accurate figure then you'll need a professional valuation, which will of course cost something. But you'd have a figure that the insurance company could not dispute in the even of a claim, or if they could prove it to be wrong then you would have a legal claim against the professional valuer.
Personally, I obtained a rebuild figure from our property surveyor, a specialist in period properties, at the time of the initial survey. It turned out to be a little over twice the market value, though I'd expect that to vary significantly depending on the type of property. I also specifically discussed the issue of over/under valuing the rebuild cost with my insurer and got confirmation from them that they would pay out UP TO the rebuild amount insured, regardless of any eventual rebuilding costs. On that basis, I feel reasonably comfortable with my rebuild amount because should the worst happen then I would at least have a substantial sum with which to rebuild something.
Coincidentally, my policy has just renewed (same company) and the premium was about 5% LOWER than last year - I can't remember when that last happened! :shock:
Here's a recent topic on this subject: https://www.periodproperty.co.uk/forum/viewtopic.php?f=1&t=16576
It rambles about a bit, as most tend to do, but it should be of interest.
A few things to consider:
1. Is the property listed? If so, the worst case scenario might be that it half burns down and then requires extensive, expensive restoration. If it is totally destroyed then it's really into new build territory, which might not be so costsly - though much will depend on the CO
2. If it's not listed then the same applies except YOU will be able to decide how to repair/rebuild and not be dependent on a 3rd party (within basic planning rules of course)
3. Will the insurance company penalise you for under-estimating the rebuild value? In this scenario, say the rebuild is valued at £100k, house is totally destroyed and the insurance company decides it will cost £200k to rebuild, but because they deem that the house was 50% under-insured they will only pay out for 50% of the insured value, i.e. £50k. This scenario penalises the non-expert property owner and encourages them to over-estimate the rebuild value to give them a safety margin.
4. If the insurance company will not penalise you for under-estimating the rebuild value then one option is to just decide how much you'd like to receive in the case of a total loss. Eg. say the property is worth £100k, you might guess a rebuild value of £200k safe in the knowledge that this amount would not leave you homeless in case of a total loss. If the actual rebuild turned out to be £150k then you're fully covered but if it turned out to be £250k then you wouldn't be fully covered but at least £200k wouldn't leave you homeless. Note that you can't really state a rebuild value of, say, £1m then burn the place down to claim the money because insurance companies generally don't allow 'betterment' - ie you shouldn't end up better off after a claim.
5. If you really want an accurate figure then you'll need a professional valuation, which will of course cost something. But you'd have a figure that the insurance company could not dispute in the even of a claim, or if they could prove it to be wrong then you would have a legal claim against the professional valuer.
Personally, I obtained a rebuild figure from our property surveyor, a specialist in period properties, at the time of the initial survey. It turned out to be a little over twice the market value, though I'd expect that to vary significantly depending on the type of property. I also specifically discussed the issue of over/under valuing the rebuild cost with my insurer and got confirmation from them that they would pay out UP TO the rebuild amount insured, regardless of any eventual rebuilding costs. On that basis, I feel reasonably comfortable with my rebuild amount because should the worst happen then I would at least have a substantial sum with which to rebuild something.
Coincidentally, my policy has just renewed (same company) and the premium was about 5% LOWER than last year - I can't remember when that last happened! :shock: