Accurate and Frequent RCAs
The Benefits Of
by Jane Beacham, MRICS
Property owners in the UK must ensure that their buildings are adequately insured to avoid financial risk in the event of damage or destruction. A crucial part of this is obtaining accurate and frequent insurance Reinstatement Cost Assessments (RCAs). These assessments calculate the cost of reinstating a property to its original condition after an insured event, such as fire, flood, or structural damage. Here, we explore the key benefits of ensuring that your RCA is both precise and regularly reviewed.
- Avoiding Underinsurance
Underinsurance occurs when a property is insured for less than its actual reinstatement cost. If a claim is made and the insured sum is too low, the property owner must fund the shortfall themselves—potentially leading to significant financial distress. Regular RCAs help ensure that the sum insured accurately reflects the true rebuilding cost, including materials, labour, and professional fees.
2. Preventing Overinsurance and Excessive Premiums
Overinsurance can be equally costly. If a property is insured for more than its reinstatement value, premiums may be unnecessarily high—without any benefit to the policyholder, as insurers only pay the actual reinstatement cost. Frequent RCAs help property owners avoid paying more than necessary for insurance, ensuring cost-effective coverage.
3. Compliance with Insurance Policy Conditions
Many commercial property insurance policies require accurate reinstatement values. Failure to provide this can result in reduced claims or voided policies. Insurers may also apply the “average clause,” which reduces payouts in proportion to the level of underinsurance. Keeping your RCA current helps avoid disputes and ensures compliance with policy terms.
4. Accounting for Market Fluctuations and Rising Costs
Construction costs fluctuate due to inflation, labour availability, and material pricing. A valuation from a few years ago may no longer reflect today’s rebuilding cost. By updating RCAs regularly, property owners can account for these shifts and ensure their insurance coverage keeps pace with the real market.
5. Meeting Lender and Investor Requirements
Lenders and investors often require up-to-date RCAs as part of their due diligence process. This provides assurance that their asset is adequately insured. Accurate valuations help meet mortgage conditions, support refinancing, and provide confidence to potential investors.
6. Simplified Claims Process
Should the worst happen, a current and well-documented RCA can significantly speed up the claims process. Insurers are more likely to process claims efficiently when they’re supported by recent, professional valuations—reducing the likelihood of delays or disputes.
7. Supporting Risk Management and Business Continuity
An accurate RCA is also a valuable tool for business continuity planning. By knowing the true cost of reinstating a property, owners and occupiers can make more informed decisions about risk, insurance, and long-term property strategy.
Are you covered correctly?
Frequent and accurate RCAs are essential for avoiding underinsurance, managing costs, and staying compliant. We recommend that property owners review their RCA every three to five years—or more frequently during periods of economic change.
Importantly, landlords are often able to recover the cost of an RCA from tenants under the lease. When quoting for an RCA, we review your lease terms and can advise whether recovery is possible.
If you’d like to discuss a Reinstatement Cost Assessment for your property or portfolio, we’d be happy to help.
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