Andrew Mazin, Building Surveying Partner at Sanderson Weatherall, explores how soaring construction costs could be impacting your property insurance and asks the question…

Are you insured for the correct sum?

When was the last time you had the building sum insured for your building checked professionally?

Most commercial property insurers require a ‘Building Reinstatement cost’, i.e., the rebuild cost of the property, when pricing an insurance policy.

Over the last 18-24 months construction cost inflation has drastically increased the cost of building work. It has been reported that building costs have increased by about 30% and for some materials even 50%.

This means that a large numbers of buildings are being significantly underinsured and no longer can you rely on annual increases in line with RPI or similar consumer index.

What are the consequences of an inaccurate Building Reinstatement Cost Assessment (BRCA)?

In its simplest terms a Building Reinstatement Cost Assessment report (BRCA) provides an accurate assessment of the likely cost of demolishing and reconstructing a property in the event of a total or partial loss, such as in a major fire.

An accurate and up to date BRCA enables the individual or company responsible for the insurance of a property to ensure that it is adequately and accurately insured.

There can be serious consequences if a property is inaccurately insured.

If a property is over insured, the insurance premium will likely be more expensive than necessary.

Conversely, if a building is under insured, in the event of a claim insurers may only pay out part of the claim. Put very simply, this means if the building reinstatement cost is £100k and the building is insured for £50k, and a claim is made for £25k following fire damage the insurer will only pay out £12,500 as the claim has been averaged down.

Complications can arise in calculating the building reinstatement cost for unusual or complex properties, such as listed buildings, mixed use properties and properties in remote locations.

We’re here to help

Sanderson Weatherall has extensive experience across all sectors of commercial and industrial property and can provide accurate BRCA’s using the most up to date industry pricing information all backed by our comprehensive Professional Indemnity Insurance cover.

We have provided BRCAs for a wide range of property types including city centre tower blocks, factories, retail and showrooms, and even some unusual buildings.

The photographs are of a building where a BRCA was carried out by the London Building Consultancy team of a school which occupied a listed building which was originally associated with the neighbouring church. There were complex factors to take into account not least the fact that the building abutted a churchyard with a number of gravestones. In addition vehicular access to the school building was along a cul-de-sac which would create logistical difficulties for contractors when rebuilding and this would be reflected in additional costs. By understanding the impact of any factor which might affect building costs a BRCA can be prepared which is based on sound methodology.

To add further value, we can provide expert valuation advice for all types of plant and machinery within commercial properties, such as factories, manufacturing facilities and advanced warehouses.

Contact one of the team today to discuss your building, plant, and machinery insurance queries.