The Lemon Fool

It's coming up to the annual building insurance renewal for our small block of six flats, and one of the perennial questions from the broker is, Is the Building Sum Insured Adequate? This year will be index linked to £xxx

We always scratch our heads a bit at that one. Someone, some long forgotten (and unrecorded) time ago must have given the brokers an amount, and they've index linked it since, but in reality we have no idea if £xxx is the right amount or not.

What we do know is that, assuming all the flats sold for the same price as the ones that have sold most recently, then £xxx is only around 65-70% of the market value of all the flats collectively, but of course that includes the land whereas the building insurance would be just for rebuilding the block.

So, short of getting a surveyor out and asking them to price the cost of clearing and rebuilding the block, is there any rule of thumb for how to figure how much the building should be insured for....?

Could this be of use?

https://calculator.bcis.co.uk/register/register.aspx

need to create an account (free).

monabri wrote:Could this be of use?

https://calculator.bcis.co.uk/register/register.aspx

Hmmm ... maybe ... thanks!

I got a bit of a shock initially 'cos with it asking for the Number of flats per floor and the Number of storeys I thought it'd be giving me a cost for rebuilding the whole block, but the amount it gave me was less than the market value of a single flat! But I then figured, even though it's not explicit about it in the report, it was giving the cost for rebuilding just a single flat (not sure how that's physically possible, at least for any other than the top floor!).

Multiplying that by the number of flats gives a figure that's 9% less than the "indexed" value our broker has, so I guess we're in the right ballpark.

I've just had the same situation re 7 flats. The last paid for independent rebuild cost calculations were 10 years ago and have been uplifted by the insurers annually ever since and so I used BCIS just as a check and was pleased to see it resulted in a rebuild cost which was close to the insurer's figure.
The total sum insured is the rebuild cost increased by around 33% to cover costs such as demolition of block and site clearance, professional fees and construction phase inflation.

Dicky99 wrote:I've just had the same situation re 7 flats. The last paid for independent rebuild cost calculations were 10 years ago and have been uplifted by the insurers annually ever since and so I used BCIS just as a check and was pleased to see it resulted in a rebuild cost which was close to the insurer's figure.
The total sum insured is the rebuild cost increased by around 33% to cover costs such as demolition of block and site clearance, professional fees and construction phase inflation.

I could add, though I don't have the exact figures to hand, that our rebuild cost is not far off 50% of the sum of the market values of the flats and the total sum insured is circa 70% of that value.

In our block (12 apartments, grade 2 listed) we had a reinstatement cost survey done not long ago as it had been 10 years since the previous one. Sadly our reinstatement cost went up by almost 70% from the previous indexed value the insurers were using, resulting in an similar increase in premiums. But glad in a way we did it as shows we were very underinsured previously, which could have been disastrous in the even of a large claim.

Tubaman wrote:In our block (12 apartments, grade 2 listed) we had a reinstatement cost survey done not long ago as it had been 10 years since the previous one. Sadly our reinstatement cost went up by almost 70% from the previous indexed value the insurers were using, resulting in an similar increase in premiums. But glad in a way we did it as shows we were very underinsured previously, which could have been disastrous in the even of a large claim.

How does it compare with the estimate the BCIS calculator gives for your block?

How much did the reinstatement cost survey cost?

mc2fool wrote:

Tubaman wrote:In our block (12 apartments, grade 2 listed) we had a reinstatement cost survey done not long ago as it had been 10 years since the previous one. Sadly our reinstatement cost went up by almost 70% from the previous indexed value the insurers were using, resulting in an similar increase in premiums. But glad in a way we did it as shows we were very underinsured previously, which could have been disastrous in the even of a large claim.

How does it compare with the estimate the BCIS calculator gives for your block?

How much did the reinstatement cost survey cost?

Our insurers sorted a drive past insurance value for a property I deal with, cost was circa £200. We were not that far out as it turned out but I had based the sq ft rate on another listed property where we had more recent reinstatement figure.

In my opinion anyone with a listed property ought to be very careful, building costs re these have, over last 4-5 years or so, soared.

Dicky99 wrote:

Dicky99 wrote:I've just had the same situation re 7 flats. The last paid for independent rebuild cost calculations were 10 years ago and have been uplifted by the insurers annually ever since and so I used BCIS just as a check and was pleased to see it resulted in a rebuild cost which was close to the insurer's figure.
The total sum insured is the rebuild cost increased by around 33% to cover costs such as demolition of block and site clearance, professional fees and construction phase inflation.

I could add, though I don't have the exact figures to hand, that our rebuild cost is not far off 50% of the sum of the market values of the flats and the total sum insured is circa 70% of that value.

That of course depends on SP per sq ft. Catch is whilst build cost does vary with geography it does not walk in step with the prevailing SP, if SP in A is half that in B the build cost in A is rarely 1/2 that in B, a brick costs what a brick costs adjusted for transport cost to different areas. (Labour can be more relationship driven but even then there is not a fixed relationship from labour cost to selling price)

We're with Halifax/Lloyds insurance (or at least have been up until the next renewal date), assumed them to be sound, until it actually came to making a claim where after months of repeated surveys (pen pushers) indicating this and that needed immediate attention/fixing, nothing actually occurred, other than yet another pen-pusher (tablet-tabber) review. Should have progressed it down the path of selecting our own rectifiers, having the work done and submitting the bills, rather than leaving it to their preferred workers. The only reason we went with their workers was on the assumption that they'd be better than the risk of finding our own from checkatrade/wherever.

Just a cautionary note that even the 'big-names' may not be sound when it actually comes to making a claim.

Not surprised premiums are up, as material costs are significantly up. Some food/building materials have seen 100%+ inflation rates.

mc2fool wrote:

Tubaman wrote:In our block (12 apartments, grade 2 listed) we had a reinstatement cost survey done not long ago as it had been 10 years since the previous one. Sadly our reinstatement cost went up by almost 70% from the previous indexed value the insurers were using, resulting in an similar increase in premiums. But glad in a way we did it as shows we were very underinsured previously, which could have been disastrous in the even of a large claim.

How does it compare with the estimate the BCIS calculator gives for your block?

How much did the reinstatement cost survey cost?

I've not tried the BCIS calculator sorry.

The reinstatement survey cost was around £1500+VAT and included a site visit with a 7 page report. One annoying thing for us was the suggestion we needed to add VAT to the reinstatement cost for insurance purposes. Seems an excuse for profiteering by the insurer as in the event of a total loss claim then VAT would not be chargeable on a rebuild, so very unlikely they would ever need to pay out the full amount + VAT.

For us, the total market value of the 12 flats is only around 45% the reinstatement cost, but as mentioned we're grade 2 listed so very expensive to reinstate and we're in a relatively cheap property area (East Midlands), so very dependent on the individual situation I should think.

I'm guessing that in the event of a large claim then in the absence of a formal reinstatement cost survey an insurer might well try to reduce the claim if they thought a property was underinsured, so for us to protect against this risk it seemed prudent to take the hit for the formal report.

Tubaman wrote:

mc2fool wrote:How does it compare with the estimate the BCIS calculator gives for your block?

How much did the reinstatement cost survey cost?

I've not tried the BCIS calculator sorry.

The reinstatement survey cost was around £1500+VAT and included a site visit with a 7 page report. One annoying thing for us was the suggestion we needed to add VAT to the reinstatement cost for insurance purposes. Seems an excuse for profiteering by the insurer as in the event of a total loss claim then VAT would not be chargeable on a rebuild, so very unlikely they would ever need to pay out the full amount + VAT.

For us, the total market value of the 12 flats is only around 45% the reinstatement cost, but as mentioned we're grade 2 listed so very expensive to reinstate and we're in a relatively cheap property area (East Midlands), so very dependent on the individual situation I should think.

I'm guessing that in the event of a large claim then in the absence of a formal reinstatement cost survey an insurer might well try to reduce the claim if they thought a property was underinsured, so for us to protect against this risk it seemed prudent to take the hit for the formal report.

Thanks for the reply. It sounds like with the grade 2 listing your reinstatement survey might have been more expensive than it otherwise would be ... and the BCIS calculator might not be relevant anyway, but it is pretty quick and simple, some might say basic, so may have amusement value to go through regardless.