May 2024
Question:
How do I calculate the rebuild cost for insurance for my rental property?
Response:
Firstly, let me say that it is not the purchase price, market value, the mortgage value or indeed how much it would cost you yourself to rebuild
the property in the event of a claim. It is the reinstatement cost (i.e. the cost of rebuilding the property from the ground up in the event of a total loss) that the claims loss assessor will adjudge to be the correct insurable value, which can differ greatly to what you would expect or what you are currently insured for.
The most accurate way to calculate the rebuilding cost of your rental property is by having a chartered surveyor / quantity surveyor conduct a full reinstatement valuation report (i.e. a Reinstatement Cost Assessment (RCA)) on your property. It needs to take into account not only the cost of REBUILDING your property (which differs greatly to new costs) but also the cost of demolition, debris removal costs, site clearance, VAT and all associated fees and charges. It also needs to consider the cost of complying with all statutory regulations and allow for potential inflation costs. If it is a protected structure, these costs can be significantly higher.
If your rental property is a standard single estate style house and was built after 1960, there is a cost calculator that you can use on the Chartered Surveyors of Ireland’s website, which allows you to input a few key details to obtain a valuation. https://scsi.ie/consumer/build/calculator/
However, you need to bear in mind, that this calculator is based on minimum base cost guides when it comes to the build, fit out & fittings within the property. It also does not allow for the cost of rebuilding any outbuildings on the land/site e.g. a garage.
It is of utmost importance that you are adequately insuring your property for what the reinstatement valuation would be on day 364 of your policy (as though you have suffered a claim on the last day of your insurance policy) to ensure that you are not underinsuring same. In the event of a claim, even a partial claim, you WILL NOT receive the full claim amount if the sums insured are not sufficient to rebuild it in the event of a total loss. That is the deal with property insurance! Insure for the FULL REBUILD value, and no less!
Response Credit S.A. Faughnan (Brokers) Ltd
T: 01 824 5555