Tayross Associates Chartered Building Surveyors | Party Wall Rates London | Party Wall Surveyor West London | Building/Structural RICS Survey London

Why a Reinstatement Cost Assessment Is Essential for Insurance

Many property owners assume that the value used for insurance purposes should match the market value of their building. In practice, this is rarely correct — and relying on the wrong figure can leave a property significantly underinsured.

This is where a Reinstatement Cost Assessment (RCA) comes in.

What is a Reinstatement Cost Assessment?

A Reinstatement Cost Assessment (sometimes referred to as an insurance valuation or declared value) is an independent assessment of the likely cost to rebuild a property if it were damaged or destroyed, reinstating it to an equivalent form, character, and standard.

Importantly, it is not:

• A market valuation
• A sale price
• A rental value

Instead, it focuses purely on rebuild cost, taking into account the realities of modern construction.

Why market value is the wrong figure for insurance

Market value reflects factors such as:

• Location
• Demand
• Comparable sales
• Development potential

Insurance reinstatement costs do not.

For example, a modest building in a historic high street may have:

• A relatively low market value
• But a high rebuild cost due to:

o Listed status
o Heritage materials
o Specialist labour
o Restricted access
o Statutory and professional fees
•

Insuring based on market value can therefore expose owners to serious shortfalls in the event of a claim.

What does an RCA actually involve?

A proper Reinstatement Cost Assessment is not a desk exercise, particularly for older or non-standard buildings.

Typically, the process includes:

• A site inspection, externally and internally where accessible
• Identification of:

o Construction type and age
o Alterations and extensions
o Heritage or architectural features
•
• Measurement and confirmation of Gross Internal Area (GIA)
• Assessment of likely rebuild costs, including allowances for:

o Demolition and site clearance
o Professional fees (architects, engineers, project managers)
o Statutory and regulatory requirements
o Heritage or abnormal construction costs where applicable
•
• Preparation of a short written report confirming the recommended declared value for insurance

Why older and listed buildings need particular care

Buildings of mixed or historic construction — such as timber-framed or listed properties — can be materially more expensive to reinstate than modern buildings.

Factors that often increase costs include:

• Traditional materials and detailing
• Specialist heritage contractors
• More complex statutory approvals
• Longer construction programmes
• Higher professional involvement

In these cases, a generic £/m² rate or insurer calculator is rarely adequate.

How often should an RCA be reviewed?

Reinstatement costs change over time due to:

• Construction cost inflation
• Changes to building regulations
• Alterations or extensions
• Shifts in labour and material availability

As a general rule:

• RCAs should be reviewed every 3–5 years
• Or sooner if significant works are carried out

The risk of underinsurance

If a property is underinsured, insurers may apply the “average clause”, reducing claim payments in proportion to the shortfall — even for partial losses.

A professionally prepared RCA helps ensure:

• Adequate cover
• Fewer disputes at claim stage
• Confidence that the declared value is defensible

In summary

A Reinstatement Cost Assessment:

• Protects against underinsurance
• Reflects the true cost of rebuilding — not market sentiment
• Is particularly important for older, listed, or mixed-construction buildings
• Should be carried out by a suitably qualified professional with inspection experience