An Insurance Replacement Valuation is a report which assess the accurate replacement cost of a building in an event that would cause any loss or damage to the property. The report estimates the actual cost to rebuild the building as at the time of the valuation and is needed to ensure that you have adequate insurance cover should the event arise.
Quantity Surveyors who are construction economists and cost consultants have suitable expertise and qualification to provide advice on the insurable value of a property.
Quantity Surveyors are experts in construction costs. This expertise allows them to be recognised as the most suitably qualified profession to provide advice on the insurable value of a property. Taking a new property for example, insuring a new strata titled property, or any property for that matter, is not as simple as using the construction cost. No matter the original construction cost, to be appropriately insured for an insurable event the estimate must include;
An assessment of re-construction times.
The replacement construction cost of the building based at current market rates and conforming to statutory changes implemented since the original date of construction.
Due allowance for cost escalation.
Do I Need One?
A Building Replacement Valuation assessment should be assessed regularly as the cost of the building can change. It is essential if you are a property owner to have your property covered for the correct amount in case if you need to make a claim and ensures you are paying the appropriate premium for your property with your insurance company.
At Duo Tax Quantity Surveyors our team can assist you by with your Insurance Replacement Valuation. An Insurance Replacement Cost Assessment report produced by us will provide you with the required amount to adequately cover the replacement and reinstatement cost. Our report would generally include the re-construction time, demolition cost, replacement cost, cost escalation and any further professional fees.
( January 2020 )
Is your property properly insured? Recently, Australia has been hit by a bushfire crisis where thousands of homes have been damaged and even destroyed. Property owners will need insurance in case the worst comes to fruition however, figuring out how much to insure can be tricky. If the insured value is too high, the owner will be paying an overstated premium and will not be refunded if the cost to rebuild the property is lower than the insured value. Even worse, if the insured value is too low, the owner will be liable to pay for the remaining replacement costs that is not covered by the insurance. An owner will want to have an insured value that is just right and the best way to do this is to get an insurance replacement report from a Quantity Surveyor.
A Quantity Surveyor is the most qualified profession for estimating construction costs that is accepted by insurers or in legal proceedings, the courts. There are a lot of costs encompassed with replacing a home from the obvious costs of constructing the house itself to the not-so-obvious hidden costs such as professional fees. Usually, an insurance company will estimate these costs via a per square metre calculation which often result in a too high premium. On the other hand, a Quantity Surveyor will do a proper assessment of the property, providing a breakdown of the reconstruction costs to give the client a cost-effective insurance premium and claim.
The report itself entails the cost to replace the existing property with a structure of a similar size and similar quality including the replacing of existing fittings and fixtures. While a physical inspection is preferred to perform an assessment of the property, the Australian Institute of Quantity Surveyors (AIQS) states that where an inspection is not possible, a ‘Desktop’ assessment should be undertaken meaning the report can still be prepared for properties in remote areas. Following the guidelines put out by the AIQS, the assessment will consider:
Building construction costs
Additional/updated statutory requirements
Professional fees, including (but not limited to) Surveyor, Architect, Structural Engineer, Civil Engineer, Hydraulics Consultant, Quantity Surveyor, and Project Manager
Development application and other authority costs
Demolition and removal of debris
Duration of demolition, design, and construction
Escalation during insured period
Cost escalation during demolition, design and procurement
Cost escalation during construction
The report will breakdown the estimated replacement costs valued as per the assessment of the property. A percentage of these costs is used to calculate the escalation in prices which can be used to adjust the insured value over the insured period however, a reassessment should be done every few years.
Over the years, we’ve represented clients as experts by assessing the replacement value of their burned down assets where the insurer may have failed the property owner with a claim payout that is well short of the cost to rebuild the property. Under instruction from your legal representative, we can assist with this professional assessment of the true cost of replacing your building that may no longer be fit for use. As affiliate members of the AIQS, we at Duo Tax Quantity Surveyors can respond to many of your needs or concerns regarding insurance enquiries. Give us a call at 1300 185 498 and we can provide you with some guidance.
Get in Contact
Stay up-to-date with latest tax depreciation changes and get educated with regular articles regarding investment properties from the tax depreciation experts.