In normal circumstances, the insurance will provide cover for the full reinstatement of the buildings and fixtures and fittings belonging to the policyholder. The sum insured provided to the insurance company must reflect the actual cost of rebuilding the property as it is. The policy will also provide protection to cover the additional costs potentially incurred by the Policyholder holding following a claim for:
- Professional fees
- Debris removal
- Potential increased costs imposed by the local authority
In order to ensure these extra specific costs are covered, an allowance for each must be included in the reinstatement valuation provided to the insurer.
VAT must also be considered in the reinstatement valuation. Whether VAT is included or not will be dependent if this can be recovered by the policyholder or not and also on the terms of the policy.
A professional reinstatement valuation by a competent building surveyor would be viewed as good practice and it is recommended that a re-evaluation is undertaken every three to five years. Index linking should otherwise be adopted at each renewal of the policy between valuations. This practice is recommended by the RICS.
There are times when it is inappropriate or impossible to ensure the building for the full reinstatement value or for the widest cover, which may be considered in choosing the right insurance policy.