Rebuilding costs

[Moo]

Our insurers seem to have a rather cavalier attitude to our buildings insurance. They know that the house is a Grade 2, 3-bed terrace dating back to the C17 and are happy to insure it for any amount we care to name, but we haven't a clue as to how much it would cost should the worst happen. (And since it was originally part of a much larger building, and the timbers go all the way through, and our neighbour deals in top-end antique furniture, it could involve more than just rebuilding our house).
So - where do I go to get a proper valuation?
And - how much should I be prepared to pay for it?

 

[Pford75]

Moo - I would strongly encourage to write to your insurers, pointing out that you are not professionals when it comes to estimating the rebuilding costs of a property and that the listed status complicates the valuation.

Ask them to confirm that the sum insured is accepted by them as 'fully insured' or to provide an alternative valuation. If they confirm that the sum is 'fully insured' then you should have no come back if there is a reason to claim and they then decide that the cover isn't high enough. Otherwise, they should provide a valuation themselves.

If they refuse to do either, then ask them on what basis they would accept your figure as a 'fully insured' figure? eg. Is it acceptable to them for you to work on sq ft. multiples?

 

[Flyfisher]

This link might help: http://abi.bcis.co.uk/
Might be a good idea to get a rebuild cost from this and then follow up Pford75' good advice to get your insurance company accept the valuation as being "full". I think it would be hard for them not to agree - it's based on their own industry figures after all.

 

[worms]

and our neighbour deals in top-end antique furniture...

Surely one can't be held liable for the contents replacement of a neighbour? Or for that matter the complete rebuild costs of a multi-occupancy building?

 

[MdB]

A point that has been made in the past is that in modern houses the rebuild cost is typically roughly half the value of the property. With old houses, the rebuild cost is often a multiple (x2, x4??) of the value of the property due to the labour required to rebuild in the original style. It is therefore important to get right.

 

[Pford75]

Surely one can't be held liable for the contents replacement of a neighbour? Or for that matter the complete rebuild costs of a multi-occupancy building?

When our 60ft Beech tree came down, it flattened a neighbours fence and hedge. Had it fallen 45 degrees in another direction, it would have flattened his bungalow. Our insurers advised that any damage to his property or contents would be dealt with under the public liability clause, which is normally a standard, fixed amount based upon the type of policy you have (in our case £10m). This may sound a lot, but you have to bear in mind that if your property were to cause permanent physical injury to someone, the claim could run into many, many thousands of pounds. As far as I am aware though, insurers do not conduct any assessment to decide the most appropriate level of public liability cover with a domestic policy.

A point that has been made in the past is that in modern houses the rebuild cost is typically roughly half the value of the property. With old houses, the rebuild cost is often a multiple (x2, x4??) of the value of the property due to the labour required to rebuild in the original style

Also remember that the cover must include site clearance costs, professional fees etc. With a listed building, retaining the right professional advice can be costly (especially if you want to insist that things are rebuilt the right way). It is also often the case that period buildings have more extensive grounds and outbuildings, walls etc. than modern properties. Our insurers quickly pointed out that on the basis of what a small section of rebuilding our wall cost, if they were to simply multiply this by the total length of the wall (ie. 12 x £120k) we did not have enough cover.....and that was without even counting the house and outbuildings etc.

I would estimate that in the current property market, our house would be worth apx. 25% of what we have to insure it for

 

[Flyfisher]

I well remember Pford75's wall saga and it's frightening to think that a wall might need to be insured for over £1m. :shock:

However, I wonder what the situation regarding potential under-insuring would be if the owner provided a quotation for the repair of a damaged/totally lost property that was well within the actual insured value? Surely the insurance company could not then claim under-insurance and reduce the claim amount?

 

[MdB]

However, I wonder what the situation regarding potential under-insuring would be if the owner provided a quotation for the repair of a damaged/totally lost property that was well within the actual insured value? Surely the insurance company could not then claim under-insurance and reduce the claim amount?

Yes they can and do. Under insurance will reduce any claim by the same percentage as the under insurance hence the importance of getting the rebuild cost confirmed with insurance company beforehand.

 

[Flyfisher]

Yes, I know insurance comapnies may reduce a claim by the same percentage as the original under-insurance, but my point was how to argue against the item in question actually being under-insured in the first place.

Example: Insure a building for £100k. It burns down and is a total loss. Commercial builders quote £200k to reinstate the building. Insurance co therefore says you are 50% under-insured so will only pay 50% of the insured value, i.e. £50k (which I think is a scandal in it's own right, but is a different point!).

However, the owner says he can reinstate the building for £100k (perhaps by a combination of DIY and ad-hoc labour) and thus he is not under-insured so the company should pay out the £100k.

I'm sure it would often be easy for the insurance company to come up with rebuilding quotes that exceed the insured value, which would work in their favour in 'allowing' them to pay only a percentage of the insured amount.

Sorry if that sounds a tad cynical but I strongly believe that if you pay premiums to provide £100k of cover then you should be able to claim up to that amount of cover. The insurance company takes on £100k of risk and you pay a premium that allows them to cover that risk. If, for whatever reason, £100k is insufficient cover then that is your risk (and tough, but fair enough), but it's hardly a fair reason for the insurance company to actually reduce their payout on a risk for which they were originally happy to take your premium.

 

[ian]

Our insurance company states "unlimited" on the sum insured. The policy includes the materials of construction and the date of 1480 for the property, not the listing etc.,but it was the insurance taken out at the time of the morgage so they should be aware of certain aspects of the house. Our premium is, I felt, quite high, and we have only had to claim a few hundred for car damage to a low wall on the road. I have wondered if they would honour their policy in the event of something more serious? Also I have been wondering if I was not paying too much? However a recent telephone cold call quote, being aware of the listed nature etc and being advised of a rebuild cost of £2000 /sq m ( derived from previous threads here, or new timber frame construction costs from Homebuilder something or other magazine at £1500 plus a quarter for clearance etc) came in within 5% of our current premium, so maybe I won't get a better deal, and maybe I will have the cover I appear to be paying for.

 

[MdB]

Example: Insure a building for £100k. It burns down and is a total loss. Commercial builders quote £200k to reinstate the building. Insurance co therefore says you are 50% under-insured so will only pay 50% of the insured value, i.e. £50k (which I think is a scandal in it's own right, but is a different point!).

I don't believe this is correct. As it is a total loss (100% of house), the insurance company would pay out the £100k (100% of amount insured).

In your example, if there was a £20k loss (10% of house value) instead of the full loss, then the insurance company would only pay out £10k (10% of amount insured) due to being under insured. This is fair if you think about it - not that I like insurance companies...

 

[Flyfisher]

I can sort of understand the rational for reduced payouts on the basis that only (say) 50% of the value of the property is insured, but I think it's fairer to consider the sum insured (£100k in this example) as the true value of the risk insured and for which we pay the appropriate premium, i.e. we pay £x to cover any events resulting in damage up to a maximum of £y.

 

[robgil]

so how do you get a rebuild cost on a 16c cottage? i am in this situation also , my insurers need a rebuild cost and my survey didnt provide my with one.
should i go to specialist builders and get quotes , then go with the highest one?
also , is it wise to over value the rebuild cost so as to have a buffer should it start to get more expensive than first predicted?

 

[Moo]

Join the club, Robgil!

I think this is an important problem, common to anyone with an old house. I don't trust our insurers to come up with a true value - for a start, I'm sure they imagine our 3-bed terrace house is much, much smaller than it really is, and they don't seem keen to come up with a realistic figure themselves. So it would be good to know how to go about getting a proper, expert estimate of the sum we should be insured for.

 

[Flyfisher]

The safest way must surely be to push the problem back to the insurance company. If they are really not capable of determining the 'true' rebuilding cost then how would they be able to determine if it was under-insured in the event of a claim?

 

[Pford75]

The safest way must surely be to push the problem back to the insurance company

I agree. Even your own survey can be challenged by the insurance company (we had originally insured our house on the basis of the mortgage survey (which did include a rebuild cost...called a 'reinstatement' cost on our survey). When the wall claim began to escalate, our insurers tried to suggest underinsurance and claimed that they had never 'agreed' the original survey figure. At one stage, they were going to pursue underinsurance and leave it to me to pursue the original surveyor on a professional negligence claim.

I was able to point to a letter from 4 years ago, when we moved in which asked the insurers for their 'expert opinion' and said that if I didn't hear from them, then I would assume that they agreed this figure.

So, the only 'safe' way is to ask the insurance company to provide the reinstatement figure or to 'agree' whatever figure you provide