Accurate Reinstatement Cost Assessments: The Critical Foundation for Property Insurance

Property is often one of a business’s largest assets. Whether manufacturing premises, a logistics hub, warehousing, or a commercial office building, the protection afforded by insurance is only as strong as the accuracy of the declared values. At Vista NW, we emphasise that a robust cover begins with a sound basis: a reliable reinstatement cost assessment (RCA).According to Zurich, the industry faces a significant underinsurance issue — more than 40% of claims are impacted by underinsured sums. (zurich.co.uk)

The Hidden Risks of Underinsurance

When property cover is based on outdated or incorrect valuations, insured parties expose themselves to major financial risk. • If you insure a building for £500,000 but the true cost to rebuild is £1 million, you may cover only 50 % of your claim. (zurich.co.uk) • Underinsurance can arise through:

• Using market value rather than reinstatement cost value. (zurich.co.uk)

• Ignoring inflation, rising materials and labour costs. (zurich.co.uk)

• Failing to engage a detailed professional assessment (for example relying on generic £/m² cost data). (zurich.co.uk)

During a claim scenario, the so-called “average clause” may apply, limiting the insurer’s liability proportionally if you insured for less than the true reinstatement cost. (zurich.co.uk)

What Makes a Thorough RCA?

Zurich outlines what a professional Reinstatement Cost Assessment should address. (zurich.co.uk) This includes:

• Structural and building elements: sub-structure, super-structure, elevations, and roof.

• Building services and fit-out costs.

• External works (landscaping, gates/fences, access).

• Professional fees (architects, engineers, project management).

• Demolition, debris removal and site clearance.

• Statutory fees (planning, building regulations) and VAT where applicable.

• Any special features or complications (listed status, unusual materials, challenging site access).

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The key message: the declared sum insured must reflect what it would cost to reinstate to the same condition, in compliance with current regulations, not just what you paid or what the market value might be. (zurich.co.uk)

Why Regular Reviews Are Essential

Construction costs (both materials and labour) have been rising rapidly in recent years, and regulatory burdens (e.g., net-zero, Building Regulations) add further cost. (zurich.co.uk) A one-off assessment is no longer sufficient. Zurich recommends a full professional RCA every three years, supplemented by annual desktop reviews to monitor inflationary and regulatory changes. (zurich.co.uk)

What This Means for Vista NW Clients

For businesses in sectors such as manufacturing, logistics, real-estate investment, and corporate property holdings, here are key actions we encourage:

1. Commission a professional RCA if you haven’t done so within the past 2-3 years. Ensure the assessor is suitably qualified (for example RICS accredited).

2. Ensure the sum insured is your true reinstatement cost, not the market value or original construction cost.

3. Review annually via desktop updates, and every 3 years via a detailed re-survey.

4. Factor in specialist features: high-spec fit-out, listed or heritage elements, unusual construction, access constraints—all raise reinstatement costs.

5. Maintain clear records of any alterations or extensions: if your property changes, your cover needs to reflect that.

6. Talk to your broker/insurer about whether they will waive the condition of average if the value is professionally assessed. Some insurers offer this as a benefit for portfolios with compliant RCAs. (zurich.co.uk)

Final Word

Proper insurance is more than ticking the box. It’s about ensuring that when a major incident occurs, you’re not left picking up the gap yourself. At Vista NW we helping clients build resilience — and at the foundation of that resilience is an accurate understanding of what it would cost to reinstate your property. With professional RCAs, regular reviews and proactive dialogue with insurers and brokers, you can rest with confidence that your cover will work as intended.

If you would like support with commissioning an RCA, reviewing your property insurance sums, or assessing your property portfolio’s exposure, get in touch with the Vista NW team — we’re here to help.