Reinstatement Cost Assessments

Question 1

What are the three different types of RCA survey?

Answer 1

a) Day one reinstatement
b) Reinstatement including inflation provision
c) Reinstatement less wear and tear (‘indemnity’ basis) - i.e. where the building is old, allows for cheaper insurance;

Question 2

What is the purpose of an RCA?

Answer 2

Reinstatement Cost Assessment:- cost to rebuild the property should total destruction occur.

Question 3

What is the guidance note for RCA’s?

Answer 3

Reinstatement Cost Assessment Guidance Note, 3rd edition.

Question 4

On what basis is the RCA prepared?

Answer 4

Prepared on a day one assessment:

Day One Basis = Declared value + inflation provision

Question 5

What is the declared value?

Answer 5

The rebuilding cost at the commencement of the insurance period without any provision for inflation.

Question 6

What is the inflation provision?

Answer 6

An “inflation provision” is a component of the insurance policy that takes into account the potential increase in the cost of rebuilding or repairing the building due to inflation over time.

It is designed to ensure that the sum insured keeps pace with the rising cost of construction, materials and labour, so that the owner is adequately covered in the event of a claim.

Question 7

What goes into the net rebuilding cost?

Answer 7

• Demolition cost.
• Professional fees.
• GIA (IPMS 2) x suitable rate.
• Allowances for modifications to comply with modern building regs.
• External works.
• Local variations.
• Listed or conservation area.

Question 8

What is ‘day one reinstatement’ insurance cover for buildings in the UK and how does it work?

Answer 8

• This policy allows for claims to be settled on a “new for old” basis, if repairs are carried out.
• The aim is to restore the building to the same condition it was in on “day one” - the day it was first built or last renovated.
• The insurance company will pay to have damaged parts of the building replaced with brand-new equivalents.
• The policy is made up of a “declared value” and an “inflation provision”.
• The amount the insurance company will pay out for a claim is limited to the sum insured, unless the policy says otherwise.

Question 9

What are some considerations that the surveyor should take into account during a property inspection for completing a reinstatement cost assessment?

Answer 9

• Assess building’s age and era, provide opinion if needed.
• Consider restrictions on demolition due to surrounding environment.
• Evaluate building’s detachment status and consider party walls, protection, and insurers.
• Assess the property’s location in relation to public transportation and city congestion zones.
• Identify any harmful materials that may increase the cost of demolition and debris removal, including those listed in the asbestos register.