Reinstatement Cost Assessments in Ireland: Is Your Property Insured for the Correct Rebuild Value?
When was the last time you checked how much it would actually cost to rebuild your property?
One of the most common mistakes property owners make when arranging building insurance is assuming that a property's market value, or even what it originally cost to build, represents what it would cost to rebuild today.
These are very different figures.
Construction costs change over time, properties are extended or altered, and the total cost of reinstating a building can involve considerably more than the construction work itself.
Demolition, site clearance, professional fees, external works and other costs associated with rebuilding a property may all need to be considered.
Getting the figure wrong could leave a property significantly underinsured.
A Reinstatement Cost Assessment (RCA) provides a professional assessment of the estimated cost of rebuilding a property, helping homeowners, commercial property owners and organisations managing property portfolios make informed decisions about their building insurance.
What Is a Reinstatement Cost Assessment?
A Reinstatement Cost Assessment estimates the cost of rebuilding a property following substantial damage or destruction.
It is not a market valuation.
Instead, the assessment considers the property itself and the costs associated with reinstating the building.
Depending on the property and scope of the assessment, this can include the cost of rebuilding together with relevant demolition, site clearance, professional fees and associated works.
The resulting figure can then be used by the property owner when reviewing their building insurance requirements with their insurer or broker.
For commercial property owners and organisations responsible for multiple buildings, maintaining appropriate reinstatement values is also an important part of wider property and risk management.
Reinstatement Value vs Market Value: What's the Difference?
A property's market value and its reinstatement value serve entirely different purposes.
Market value relates to the amount a property might achieve if sold on the open market.
It can be influenced by location, demand, land value, development potential and wider property-market conditions.
Reinstatement value relates to the estimated cost of rebuilding the property following substantial damage or destruction.
The two figures can therefore be significantly different.
Daniel Gunning MSCSI MRICS, Managing Director of DGA Surveyors, says one of the most common issues he encounters is property owners using market value to determine rebuilding costs or simply underestimating what it would cost to reinstate their property.
For example, a commercial property in a highly desirable location may have a substantial market value because of its location and investment potential. That does not mean that the same figure represents the amount required to rebuild it.
Likewise, a property with a lower market value could have significant reinstatement costs because of its construction, specification or other characteristics.
This is why the purchase price or current market value of a property should not automatically be used as its rebuilding value.
Why Is an Accurate Reinstatement Value Important?
If a property is insured for less than its actual reinstatement cost, the property may be underinsured.
That can have serious financial consequences if the owner subsequently needs to make an insurance claim.
Depending on the terms of the insurance policy, underinsurance may result in the amount paid under a claim being reduced, potentially leaving the property owner responsible for part of the cost of repairing or reinstating the building.
Importantly, underinsurance may affect partial losses as well as situations where a building has been completely destroyed.
Maintaining an appropriate reinstatement value therefore helps property owners make better-informed decisions when arranging or renewing their building insurance.
A €150,000 Reinstatement Cost Shortfall: A Real DGA Example
DGA Surveyors was asked to assess the rebuilding cost of a residential property in County Wexford.
The property was a self-build home constructed in 2005.
For approximately 20 years, the homeowner had continued renewing their home insurance using a rebuilding value based on what the property had originally cost to construct.
DGA carried out a Reinstatement Cost Assessment based on the property as it existed at the time of the assessment and current rebuilding requirements.
The assessment identified an estimated €150,000 difference between the homeowner's existing insured rebuilding figure and DGA's assessed reinstatement cost.
Had the property suffered a significant insured loss, that level of underinsurance could potentially have had serious financial consequences for the homeowner, depending on the terms and conditions of their insurance policy.
The example demonstrates why historic construction costs should not automatically be relied upon as an indication of what a property would cost to reinstate today.
Can Homeowners Use the SCSI House Rebuild Calculator?
For many standard residential properties, the SCSI House Rebuild Calculator provides homeowners with a useful way of estimating rebuilding costs for insurance purposes.
The calculator provides regional rebuilding rates and is designed for standard estate-type houses.
Homeowners should review their rebuilding costs regularly and take account of changes made to their property, including extensions and other significant improvements.
However, a standard online calculator is not appropriate for every property.
The SCSI itself advises that its standard rebuilding rates should not be used for certain property types, including one-off homes and period properties, and that professional advice should be considered where the standard assumptions do not apply.
Properties with non-standard construction, such as a thatched roof, bespoke design or other unusual characteristics, may therefore require an individual professional assessment.
The important question isn't simply whether you can use an online calculator.
It is whether the calculator's assumptions accurately reflect your property.
When Should You Consider a Professional Reinstatement Cost Assessment?
There are several circumstances where a professional assessment may be more appropriate than relying solely on standard rebuilding-cost guidance.
Non-Standard Residential Properties
A property with unusual or non-standard construction may fall outside the assumptions used by standard residential rebuilding-cost calculators.
Examples can include one-off houses, period properties, thatched properties and bespoke buildings.
Commercial Properties
Commercial buildings can be considerably more complex.
Offices, retail premises, industrial buildings and other commercial properties can have different construction methods, specifications, external works and reinstatement requirements.
A professional assessment allows these characteristics to be considered individually.
Properties That Have Been Significantly Altered
An extension, substantial refurbishment or other significant alteration can change the cost of reinstating a property.
Where major works have taken place since the rebuilding value was last established, the existing figure should be reviewed.
Older Reinstatement Assessments
Construction costs can change significantly over time.
A reinstatement figure established several years ago may therefore no longer accurately represent the estimated cost of rebuilding the property today.
Property Portfolios
Organisations responsible for multiple properties need reliable and consistent reinstatement information across their portfolio.
This can be particularly important where the portfolio contains buildings of different ages, uses, sizes and construction types.
What Can Be Overlooked When Calculating Commercial Reinstatement Costs?
Calculating the reinstatement cost of a commercial property involves more than simply multiplying the building's floor area by a construction rate.
The full extent of the reinstatement needs to be considered.
From DGA's experience, elements that can sometimes be overlooked include:
demolition of the damaged building;
site clearance;
the full cost of reconstruction;
planning-related requirements;
external works;
reinstatement of car parking spaces; and
increases in construction costs.
The impact of overlooking these elements can become even more significant when an organisation is responsible for a portfolio containing several properties.
This is one of the reasons commercial property owners and asset managers should periodically review the basis on which their reinstatement values have been established.
How Does DGA Carry Out a Reinstatement Cost Assessment?
DGA's approach begins with understanding the individual property rather than relying solely on a generic rebuilding-cost figure.
1. Review of Existing Information
Where available, DGA reviews existing property plans and relevant building information.
2. Site Survey
A physical inspection of the property is undertaken, with site notes and photographs recorded as part of the assessment.
3. Property Measurement
The building's floor area is established using existing plans where appropriate and measurements taken during the survey where required.
4. Construction Assessment
The surveyor records the property's construction type, relevant building elements and any additional features that may affect the estimated cost of rebuilding.
5. Rebuilding Rate and Cost Assessment
An appropriate rebuilding rate is identified and considered alongside the other relevant costs associated with reinstating the property.
6. Reinstatement Cost Assessment Report
Following the assessment, DGA provides the client with a descriptive report containing a full breakdown of how the Reinstatement Cost has been calculated.
This provides the property owner with a documented basis for reviewing their building insurance requirements with their insurer or broker.
How Often Should Reinstatement Costs Be Reviewed?
A reinstatement value should not be treated as a figure that is calculated once and then forgotten.
For homeowners with standard properties, rebuilding costs should be reviewed annually, including when renewing home insurance.
The figure should also be reconsidered when there has been a material change to the property, such as an extension.
For commercial properties, DGA recommends carrying out a desktop review annually and a physical inspection approximately every three years.
An earlier physical reassessment may also be appropriate following significant alterations or other material changes to the building.
Regular reviews are particularly important because construction and rebuilding costs can change considerably over time.
Reinstatement Cost Assessments for Commercial Property Portfolios
Maintaining accurate reinstatement information becomes increasingly important, and potentially more complex ,when an organisation is responsible for multiple buildings.
A portfolio may contain properties of different ages, construction types, sizes, specifications and uses.
Individual buildings may also have been extended, refurbished or altered at different times.
As a result, an organisation may find that the reinstatement values recorded across its portfolio have been established at different times or using different methodologies.
A structured approach to Reinstatement Cost Assessments can help organisations maintain more consistent information across their portfolio and identify properties where existing figures may require further review.
For property and asset managers, the objective is not simply to produce a rebuilding-cost figure for each building.
It is to maintain reliable property information that supports informed insurance and asset-management decisions.
Professional Advice on Rebuilding Costs
The issue of underinsurance and rising rebuilding costs has received increasing attention in recent years.
DGA Managing Director Daniel Gunning MSCSI MRICS has previously discussed the subject publicly, including an appearance on LMFM's Late Lunch, where he explained why homeowners should revisit the amount for which their property is insured in the context of changing rebuilding costs.
For property owners, the key message is simple: the figure on an insurance policy should not be assumed to remain appropriate indefinitely.
Properties change. Construction costs change. Rebuilding requirements change.
Your insurance information needs to keep pace.
Frequently Asked Questions
What is a Reinstatement Cost Assessment?
A Reinstatement Cost Assessment provides a professional estimate of the cost of rebuilding a property following substantial damage or destruction. The assessment can be used by a property owner when reviewing their building insurance requirements.
Is reinstatement value the same as market value?
No.
Market value relates to the amount a property might achieve if sold on the open market.
Reinstatement value relates to the estimated cost of rebuilding the property.
The two figures can be significantly different.
Can I use the SCSI House Rebuild Calculator?
The SCSI House Rebuild Calculator can provide an estimate for qualifying standard estate-type residential properties.
It is not intended to cover every property type.
Owners of non-standard, one-off, period or other properties falling outside the calculator's assumptions should consider obtaining professional advice.
What happens if my property is underinsured?
The consequences depend on the individual insurance policy.
Under some policies, being insured for less than the appropriate reinstatement value may result in a claim being reduced proportionately, leaving the property owner responsible for part of the cost.
You should discuss the specific implications with your insurer or insurance broker.
Should I review my rebuilding cost every year?
Homeowners should review their rebuilding costs annually and take account of significant alterations or improvements to their property.
For commercial properties, DGA recommends an annual desktop review together with a physical inspection approximately every three years.
Should I reassess my property after building an extension?
Yes. A significant extension or alteration can change the estimated cost of reinstating the property and should prompt a review of the existing rebuilding figure.
Can DGA assess commercial properties?
Yes. DGA provides Reinstatement Cost Assessments for commercial properties and can consider the individual construction, building elements, external works and other factors relevant to the property's estimated rebuilding cost.
What will I receive after a DGA Reinstatement Cost Assessment?
DGA provides clients with a descriptive report containing a breakdown of how the Reinstatement Cost has been calculated.
Is Your Property Insured for the Correct Rebuild Value?
Whether you own a home, commercial building or manage a larger property portfolio, relying on an outdated or inappropriate rebuilding value can expose you to unnecessary financial risk.
A professional Reinstatement Cost Assessment can help establish an appropriate rebuilding figure based on the property as it exists today.
DGA Surveyors provides professional Reinstatement Cost Assessments across Ireland.
If you are unsure whether your current rebuilding value remains appropriate, contact DGA Surveyors to discuss your property and request a quotation.
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