Why Do You Need Professional Reinstatement Costs for Your Self Build Insurance?

Simon Middleton from self build insurance provider Protek discusses why you need to insure your project at its professional reinstatement costs, even if you’re doing a lot of the work yourself
Protek self-build insurance
by Protek
29th April 2024

Most self builders know the importance of insuring a home as it’s being built, but do you have the right level of protection in place – have you insured your project at its professional reinstatement cost?

This is key to recovering from a serious loss, but what does it mean for your scheme?

Build Budget vs Pro Reinstatement Cost

When completing your insurance proposal form, you’ll need a sense of your build budget (ie how much you expect to spend on construction). However, perhaps you’re doing some jobs yourself, so your figures aren’t an accurate indication of how much it would cost to, say, reinstate the house using a main contractor just days before completion.

The money required to have your project rebuilt by a main contractor is what’s known as a professional reinstatement cost, which is the figure we ask for when putting together your insurance proposal here at Protek. And that’s because going with your build budget instead may not be enough to rebuild your project quickly after a major catastrophe.

A self builder’s construction costs could be as much as 30% cheaper than a professional reinstatement. For instance, you’re on a career break to manage your project, hiring individual trades and doing chunks of the work yourself. You’ve made some big savings in comparison to hiring a main contractor to do it all on your behalf.

In the scenario discussed in this feature, a fire breaking out just as you’re about to complete your home would be catastrophic for your self build – especially if it turns out your project is underinsured, meaning you can’t afford to rebuild

However, imagine it’s just weeks before you’re due to move in and bad luck strikes as your roof contractor knocks over his blowlamp and starts a house fire. You’ll take some comfort in knowing you’ve got insurance in place, only to realise that the cost you gave 11 months ago doesn’t match the works, as your costs have escalated over time.

Your loss adjuster will assess the damage and start the process of managing the claim with an aim to get the property rebuilt as quickly as possible, which involves pricing up the reinstatement works. The rebuild needs to be carried out by contractors as you’re due to get back to work to pay the mortgage. However, this leaves a big discrepancy between the build budget you initially insured the project for and the loss adjuster’s reserve estimate costs.

In this scenario, you’re seriously underinsured. The escalating costs and limited financial resources would leave you attempting the project again on an extremely tight budget, or, sadly, unable to do so – definitely not the news you need after a disaster.

The Right Figures

Your self build insurance should reflect the full cost of professional labour and materials, as well as the price of site clearance, debris removal and professional fees. It’s also a good idea to reassess your reinstatement cost regularly during your project, especially as many bespoke homes can quickly push over initial budget forecasts. The effect of the reinstatement cost on your insurance premium shouldn’t be your focus – if you suffer a loss and are underinsured, your bad situation can soon become much worse, so it’s best to protect yourself.

A turnkey build with a package supplier or building contractor is a good indicator of an appropriate sum. The Royal Institute of Chartered Surveyors’ (RICS) rebuilding cost calculator is also a great tool. You’ll need to know your home’s external floor area (upstairs and downstairs) for an accurate cost per m², but be aware that it doesn’t account for every construction method.

If you’re reworking an existing building, such as a barn conversion, your professional reinstatement cost should cover the parts of the original structure you’re retaining as well as the new building works. These figures can be a little tricky to assess, so you should engage the skills of a building surveyor to get an accurate quote. They will be able to assess the hidden cost of rebuilding, which can be especially difficult if you’re working on a listed property.

Simon Middleton is managing director of Protek Group. Since starting his career as a site engineer, he has been underwriting site insurance and structural warranty in the self build and construction sector for over 25 years. For more information speak to the team by calling 0333 456 8030 or go to Protek’s website.

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