How to calculate property value for buildings insurance?

[MM]

I got one quote, and they worked out the value for buildings insurance based on post code, number of bedrooms and other points. Then I called another broker and she said her firm had to be advised the value required to be insured, as they could not themselves provide any estimate. I kind of had the feeling from them of, take it or leave it!

As I don't need a mortgage and the building is brand new, how am I supposed to find out what to insure it for? I believe the buildings insurance is normally a lot less than the price paid for the property.

MM

[Graeme]

This should help

[Andy Hall]

These people employ actuaries.

Actuaries are people who found accountancy too exciting.

Insurance companies are basically the white collar version of a bookies and operate in similar ways - looking at odds and form, laying off bets and so on.

So they look at what the others are doing as well as applying their own rules.

You could ask the developer.... Normally the exercise would be part of a lender's survey, so you could also ask prospective neighbours what their buildings insurance is.

.andy

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[Owain]

"MM" wrote | As I don't need a mortgage and the building is brand new, | how am I supposed to find out what to insure it for? I | believe the buildings insurance is normally a lot less | than the price paid for the property.

In theory it would be the market price of the property less the cost of the land (plot value). However if the property has been built to a better than average standard (which would not be fully reflected in market price), rebuilding costs will be somewhat higher. Also, market price does not take into account the costs of eg alternative housing for you during reconstruction.

Unless you expect rebuilding costs to be significantly higher than normal or you have a very cheap house on a valuable plot, then advising the insurer of current market value should be reasonably close.

Owain

[R Taylor]

the rebuild insurance is double the purchase price, ime.

others may disagree, insurance companies dont....

RT

[Huge]

Cobblers.

£1K/metre^^2.

Just checked 'cos we've got (another) subsidence claim in.

[Andy Hall]

The other way around, surely.

How can the rebuild cost exceed the cost of the existing building plus the land? The land doesn't go away......

.andy

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[MM]

At least I know that that is completely wrong. The rebuild cost is

*far* lower than the open market value.

MM

[Andrew Gabriel]

What you pay for a house really has very little to do with the cost of the land and the cost of building a house, and much more to do with what the market will bear in that area for x bedrooms, y reception rooms, and z bathrooms.

Rebuilding cost of an end-of-terrace 1895 house was nearly double the market value. You couldn't just stick a modern Barratt rabbit hutch up there if it burned down. You would have to build a terraced property to join on and reasonably well blend in to the rest (doesn't need to be a perfect match), but to current building standards.

[Jo]

MM wrote in news: [e-mail]:

...from standard tables here:

[Andy Hall]

Agreed, but this is a brand new house......

.andy

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[The Natural Philosopher]

Normally its rebuild after total destruction cots, which is probably in the region of 100-150 a sq ft, for insurance purposes, tho in reality it can be a lot less..

[Mark]

LOL Undoubtedly for a House in Stoke, could even be treble. But do you think this would also apply to a similar house in London. ?

[Phil Addison]

Why would anyone insure their house for other than its market value, less the value of the cleared land? Why would anyone want to rebuild anyway, and why should anyone expect a brand new rebuilt house to replace, say, a 100 year old Victorian one?

If your house gets bombed to the ground surely you would do the same as if your car was written off - just collect the market value from the insurance company, walk away and buy a similar one with the dosh. Then sell off the old land to developer who will put 3 modern boxes on it.

I suppose there could be a case for insuring for the full market value if the insurers would deem it a 'write-off' and deal with the land clearance/re-sale issues themselves.

I haven't seen any statistics but it seems to me that the chances of a complete domestic gutting must be pretty small compared to the millions of properties paying yearly premiums.

Phil The uk.d-i-y FAQ is at

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[Jim Alexander]

As well as the ABI guide already suggested you could look at

on which the ABI is based on. Your library may be able to get the book or you could blag online access at a college or uni.

Looked into this when renewing my insurance recently. Many companies will fill in a value based on the house details. If you accept their valuation you are usually covered whatever the actual costs. Egg had the closest to the ABI figure but still higher. Norwich Union were usually close but not for older houses. Esure who like to think they offer the lowest premiums had a ridulously high suggested value resulting in a higher premium.

Accepting a reasonable suggested valauation is still cheaper than employing a valuer who if you are lucky will just use the book anyway....

Jim A

[Lobster]

My buildings insurance is with the AA (which, unlike contents insurance or car insurance IME) is an excellent deal - but also, significantly for this thread, they aren't interested in the market or reinstatement value at all; they simply ask you for postcode, no of bedrooms etc, and you're covered for full reinstatement cost (they don't bother with giving you a figure). I recommend the OP at least gives them a go.

David

[Alan]

Isn't it the land that costs the money in London and not necessarily the property build on it?

[The Natural Philosopher]

Rebuilding my house has cost about half of what its current market value is.

YMMV.

When a family friends house burnt down, the shell and land went for the original house cost. The newer rebuild was infinitely better than the old house and commanded a little under twice the price.

[The Natural Philosopher]

Yes. Curiously enough, I am in the throes of selling my mothers house - a new build in 1953.

There are no deeds to the house, only the land, and planning permission to build.

It seems that when you sell a house, you actually sell the freehold to the land, and whatever is fixed upon it....

..extension of this principle to insurance, probably means you merely insure what is built upon it, not the land.

This may have extreme implications if the land becomes unusable due to coastal erosion or flooding, or subsidence etc.

[Huge]

Cost of clearing the site. Cost of upgrading infrastructure to resent legally required levels, maybe.

[19 lines snipped]

Our house is insured for about 65% of its market value. The insurer, our structural engineer and the insurers loss adjuster all think this is fine, even excessive.