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:
- Location
- 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.
Tuan is an award winning Quantity Surveyor and leads Duo Tax Quantity Surveyors – Australia’s fastest growing provider of Tax Depreciation.
