Insurance Valuations

If you’re being charged for an Insurance Valuation or Building Reinstatement Valuation (they are the same thing), you may wonder why and in some cases you may be disputing the cost. However these valuations are incredibly important, you should be more worried if you are not being charged for such a service.

The valuation is an assessment of the full reinstatement costs of the building for insurance purposes. It should take into account the full rebuild cost for the building including demolition costs. The valuation may also have  to include costs for loss of ground rent and alternative accommodation; however this will depend on the type of policy in place. The purpose of the valuation is to ensure that the declared value of the property is correct on the insurance policy, as there are issues in over or under insuring.

A building surveyor should be contacted to carry out the assesment. The surveyor will look at various aspects on the building including age, construction, number of storeys, location, floor area, demolition costs, site clearance, planning etc. Assessments should be carried out when the building is first complete and then every 3-5 years, or when structural changes have taken place to the block, or in the event of a large economic change. Best practice would involve having the surveyor carrying out a desktop valuation each year; these cost significantly less. You may also find that if you use the same surveyor when the next assessment is due they are willing to provide a desktop valuation without the need to re-visit site.



The more regularly that valuations are carried out, the more sure you can be that the insurance policy is correct. If your policy is over-insured then you will be paying a much higher premium than you need to. Much more worrying is if your block is under-insured. In this scenario the insurer has no obligation to pay the full claim value to re-instate the building. This could lead to leaseholders losing their homes, and the landlord or agent having to pay the shortfall or face the courts.

My advice would be to have a full assessment carried out straight away and a desktop valuation provided each and every year just before the insurance policy requires renewing. If you change surveyors then we would always recommend they visit the development for the first valuation they carry out. This makes 100% sure that the building is insured correctly in each service charge year, confirms that the policy leaseholders pay is correct and minimises the risk to the landlord, agent and management company. You may find that this advice leads to increases in the service charge, however these yearly costs will be a lot less than any potential problems caused in the event of a block being under-insured.

For landlords or directors of RMC’s who would rather only have a valuation carried out every 3-5 years, I suggest that you budget a small amount of the cost each year to build a fund. That way the service charge remains constant rather than spiking when a valuation is required. You will find that a sharp increase in service charges gives people cause for concern and a reason to investigate and dispute the costs.

Hopefully this guidance will clear up exactly what an insurance valuation (building reinstatement valuation) is, why they are important and the best way in which to have them carried out. If you require further advice, then please get in touch.