Last year I had a standard valuation carried out for a mortgage switch, which estimates the market value of my home. When renewing my insurance this year, I used the Society of Chartered Surveyors Ireland (SCSI) rebuild calculator and received a much lower figure than anything referenced in that valuation report. I’m unsure why the two assessments differ so much, and which one I should rely on for insurance purposes. Do most homeowners need a separate reinstatement valuation, or is the SCSI calculator generally sufficient?
Insurance reinstatement valuations and mortgage valuations are two very different things, used for very different purposes. The confusion around the two valuations is very common and it is very important to get the correct valuation for insurance purposes.
Firstly, the valuation carried out for the mortgage provider (bank) is on the basis of the market value of the property, in other words, what the property would sell for. This will include factors such as location, size of the property and supply and demand in the area. In high‑demand locations, the market value of the property can be well above the cost to construct such a property.
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In respect of an insurance reinstatement valuation of the property, this is explicitly related to the cost to reconstruct the property as a result of a total loss event such as a fire. The insurance reinstatement valuation takes into account the cost of demolishing the remains of the property and of site clearance, the reconstruction of the property (ie construction materials and labour) and professional fees (surveyor, architect, engineer etc).
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It is extremely important that there is no direct relationship between market value and reinstatement value. It is also very important that the property is adequately insured so you are not underinsured – as such an occurrence could leave homeowners having to pay part of the rebuild cost out of their own pocket – or overinsured.
The SCSI’s insurance rebuild calculator assists homeowners in calculating the minimum rebuild value for the property by entering the relevant details for it.
Kevin Brady is a chartered quantity surveyor and a member of the Society of Chartered Surveyors Ireland.
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