Insurance reinstatement value

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    Insurance reinstatement value

    ,,,But i was wondering if anyone out here in the property world could shine some light on a query i have.

    I have been looking at flats with the idea to buy to rent, in the region of £60-80k. I've been to see about 10 and have taken a liking to 2 or 3.

    One thing I've noticed whilst studying the home reports the "Insurance reinstatement value" on the each of the three I think look by far the best, are about 50% higher than the other kind of dingy flats.

    I was wondering is this figure purely related to the home insurance payed? Is it a coincidence that the nicer property's I've viewed have had a higher "Insurance reinstatement value"?

    Can someone explain to me the significance of this "Insurance reinstatement value" number?

    Thanks

    #2
    The insurance reinstatement value is what it would cost to rebuild the property to its present specification. This would include any costs of demolition, site clearance and professional fees for drawing up plans and obtaining planning permission. Sometimes the insurance reinstatement value is greater than the market value and sometimes less because the value of the land is not taken into account and some properties will cost more to rebuild than others.

    Comment


      #3
      Hi thanks for the reply. I know the value represents the cost to rebuild the property exactly, i should of make that clear which i didn't,

      Was wondering if there was any other relevance or pattern to this number though? Like is this number used for calculating home insurance also ?

      thanks for the reply

      Comment


        #4
        The answer to 3 is in 2 so dispense with the idea of home insurance which really only refers to houses.

        In most cases the block is insured as a block so that the property is reinstated and ready to move into, and owners only insure their contents carpets flooring etc and allied risks associated with renting. The cost if insurance is in the service charge and normal enquiries before contract will provide you with the sum insured and risks covered.

        Thats why it is important to get the lease straight away and work out who insures and for how much, as well as enquiries of the landlord or managing agent immediately and not 2/3 weeks or the end of the process.

        As to patterns #2 covers that two blocks with similar sized flats next to each other can be wildly different if one is a Victoria conversion with period features and a high spec of fitting out, and the other a bog standard entry level purpose built block.
        Based on the information posted, I offer my thoughts.Any action you then take is your liability. While commending individual effort, there is no substitute for a thorough review of documents and facts by paid for professional advisers.

        Comment


          #5
          Matthew_,

          Dingy flats may have poor managing agents looking after the block of flats and such agents may be failing to keep the building re-instatement cost figure up to date.

          Comment


            #6
            thanks for the input,

            So basically the higher the re-in statement value, the worse condition the building is in, and more likely to need maintenance work?

            Comment


              #7
              Originally posted by Matthew_ View Post
              thanks for the input,

              So basically the higher the re-in statement value, the worse condition the building is in, and more likely to need maintenance work?
              Er no. The Gordodn response is nonsensical. The poor agent he refers to has every interest in keeping the value as high as possible in order to increase insurance commissions. Gordon's one of the nutty brigade who froth at the mouth at the mention of less and anyone involved with them as lawyer freeholder or agent are all evil.

              Some of are.....but not all the time, as in now.


              The declared sum for insurance purposes is not about the current state of repair but the cost of replacement on a total loss and all the attendant costs fees and expenses. Repair only comes into it when an incident occurs and the insurer can show that state of repair contributed to the issue or they are not preapred to pay out in full as you failed to keep the property in repair.
              Based on the information posted, I offer my thoughts.Any action you then take is your liability. While commending individual effort, there is no substitute for a thorough review of documents and facts by paid for professional advisers.

              Comment


                #8
                The cost if insurance is in the service charge and normal enquiries before contract will provide you with the sum insured and risks covered.
                Cheers for the reply,

                You mean i can find out the insurance cost before i buy yeh? is it in the home report if not do you know where i could find it? thanks.

                Comment


                  #9
                  The survey report will indicate a value for the flat so if they say £100000, and there are 10 flats and you pay 10%of the premium for a declared value on the buildings policy of £1M, its about right. The latter is obtained not in that survey report but normall pre sale enquiries by your lawyer of the agent or freeholder
                  Based on the information posted, I offer my thoughts.Any action you then take is your liability. While commending individual effort, there is no substitute for a thorough review of documents and facts by paid for professional advisers.

                  Comment

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