Building rebuild costs ...insurance ... warning

I am just renewing some buildings insurance.

I was advised to get a new desk based survey done on the building to make sure the level of cover is adequate for the current market as there are inflationary pressures on the building trade and materials.

The estimate I have just received was 94% higher than my current insured amount.

Keep in mind that if you have a significant loss and are found to be under insured not only do you get paid less you also get penalised for under insuring.

Watch out chaps make sure your rebuild costs are correct.

Might need to up my Unlimited buildings cover. [All my policies came with unlimited cover in recent years, for both houses, and I don't go top-end.]

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Originally Posted by jukeboxs

Might need to up my Unlimited buildings cover. [All my policies came with unlimited cover in recent years, for both houses, and I don't go top-end.]

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My home is on unlimited cover but this was a mixed commercial / residential building that has a specified figure; I believe it is quite a common situation.

Just trying to give people a heads up on a possible issue; clearly not an issue for you.

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Originally Posted by Montello

My home is on unlimited cover but this was a mixed commercial / residential building that has a specified figure; I believe it is quite a common situation.

Just trying to give people a heads up on a possible issue; clearly not an issue for you.

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Claims and settlements are a nightmare in these circumstances. There was a fire in a ground floor premises in town near me - row of shops/commercial premises with flats/apartments above. This ended up being more than a dozen different insurance companies fighting it out. Complicated further that the properties involved had a mix of owners/landlords and numerous changes to the layouts etc. over the years.

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Originally Posted by Chris_in_the_UK

Claims and settlements are a nightmare in these circumstances. There was a fire in a ground floor premises in town near me - row of shops/commercial premises with flats/apartments above. This ended up being more than a dozen different insurance companies fighting it out. Complicated further that the properties involved had a mix of owners/landlords and numerous changes to the layouts etc. over the years.

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I imagine that scenario would be difficult. That’s why I also take the legal cover.

You raise a very good point and a very important issue. I write as a Chartered Surveyor that undertakes these valuations and does many hundreds a year. I have been involved in insurance claims where the owner has been underinsured, have done many actual post loss reinstatements through our building surveying department, and work for some of the largest insurance brokers in the country as their recommended surveyors.

The first thing I would say is that there is no collusion whatsoever that I have seen in the industry. I have never once been put under any pressure to value at a certain level or even have been shown a passing interest in the level of reinstatement. Indeed, these can go up as well as down and the insurer always reduces the rate of cover in respect of the latter.

The issue (the risk of being underinsured) was always present but was somewhat mitigated by insurers 365 day inflation and annual indexation allowance but recent rampant inflation in labour and materials has led to build cost rises being exponential. The worst example we saw was a selection of blocks of flats in London insured for £92m be revalued to £172m and clearly had there been a loss, these would not have been rebuilt and a lot of people would have been homeless and sued in the process. This scenario doesn't bear thinking about.

We are also project managers and developers and I can tell you that prices have risen to an eyewatering degree both in labour and materials. If I could get a pound for every "good development" that I see on the market that will make the developer a loss due to the cost of construction, I would be quite well off. The worst I have seen is a former pub in a London suburb that was purchased for £4.6m with planning for 63 apartments and was forecast by a valuation from the vendor to make £4m profit for the developer. It showed a loss of £2m on our development appraisal and the client was majorly put out.

Many domestic policies have unlimited cover. If you do not, see if there is a free online tool to assist you via BCIS, failing that, my team would be happy to help for a small fee.

JC

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Originally Posted by JC180

You raise a very good point and a very important issue. I write as a Chartered Surveyor that undertakes these valuations and does many hundreds a year. I have been involved in insurance claims where the owner has been underinsured, have done many actual post loss reinstatements through our building surveying department, and work for some of the largest insurance brokers in the country as their recommended surveyors.

The first thing I would say is that there is no collusion whatsoever that I have seen in the industry. I have never once been put under any pressure to value at a certain level or even have been shown a passing interest in the level of reinstatement. Indeed, these can go up as well as down and the insurer always reduces the rate of cover in respect of the latter.

The issue (the risk of being underinsured) was always present but was somewhat mitigated by insurers 365 day inflation and annual indexation allowance but recent rampant inflation in labour and materials has led to build cost rises being exponential. The worst example we saw was a selection of blocks of flats in London insured for £92m be revalued to £172m and clearly had there been a loss, these would not have been rebuilt and a lot of people would have been homeless and sued in the process. This scenario doesn't bear thinking about.

We are also project managers and developers and I can tell you that prices have risen to an eyewatering degree both in labour and materials. If I could get a pound for every "good development" that I see on the market that will make the developer a loss due to the cost of construction, I would be quite well off. The worst I have seen is a former pub in a London suburb that was purchased for £4.6m with planning for 63 apartments and was forecast by a valuation from the vendor to make £4m profit for the developer. It showed a loss of £2m on our development appraisal and the client was majorly put out.

Many domestic policies have unlimited cover. If you do not, see if there is a free online tool to assist you via BCIS, failing that, my team would be happy to help for a small fee.

JC

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My comment about collusion wasn't serious so I have edited it out to avoid any further mis-understandings; apologies.

The valuation was done by a company recommended by the broker.

The increase was almost double so either I have been unwittingly under insured for years or the inflation in materials, labour, professional fees etc etc in recent years has been way beyond my expectation.

I did use the BCIS calculator before I did this and it came up with a figure in line with my original figure but it's not really geared up for a mixed commercial/retail property but to be fair I don't see the usage mix would have that significant bearing on the rebuild cost.

The rebuild valuation I am now insuring, I personally think, is over the top at £5100 per m2 but now it is in writing I have little choice to insure for that figure.

Would £5100 per m2 sound a reasonable figure for semi-detached shop with 2 flats above (not listed) total 135m2??

Hi, wasn't the least bit put out by your comments. The insurance industry is rightly treated with suspicion but in this particular area I think they don't meddle to their own advantage. At least given my personal experiences.

I have to say that valuation sounds very high for what you have described. On top of the cost psm we add a whole host of expenditure but still this does look high. I will PM you my email address and would be happy to review and give you my thoughts FOC if you email it to me.

Regards JC.