REPLACEMENT COST ESTIMATES FOR INSURANCE PURPOSES

In Australia, the issue of under-insurance for residential properties is alarmingly prevalent. Statistics indicate that an estimated 80% of houses are under-insured, meaning that, in the event of a total loss or catastrophic event, the insurance coverage would fall short of the amount required to cover the actual costs of redesigning and reconstructing the home. This discrepancy often leaves homeowners facing significant financial burdens when they need to rebuild in the event of fire, flood or other disaster.

Several factors contribute to this widespread under-insurance. One major reason is the rapidly escalating cost of construction, which has been outpacing the rate of indexed inflation. As building materials, labour and regulatory costs soar, many homeowners find that their insurance policies, which may have been adequate when originally purchased, no longer align with the current market realities. Additionally, standard insurance policies often do not automatically adjust to reflect these rising costs, leading to a gap between the insured value and the actual replacement value of the property.

Homeowners might not regularly update their insurance coverage with an insurance valuation to reflect changes in the property’s value or the costs associated with its potential reconstruction. Renovations, extensions, or even changes in building codes can significantly alter the cost of rebuilding a home, but these are frequently overlooked when renewing insurance policies. Consequently, many property owners are left with coverage that does not account for these updated costs and requirements with an accurate replacement cost estimate for insurance.

To address this critical issue, CPP Quantity Surveyors offers specialised services to help homeowners obtain an accurate and comprehensive replacement cost estimate, also known as a replacement cost estimate for insurance or insurance valuation. This detailed report provides an accurate evaluation of the expenses involved in rebuilding your home to its original specifications. Our assessment encompasses not only the direct construction costs but also additional expenditures such as demolition, design fees, Development Application (DA) costs, and anticipated cost escalation.

With a CPP Quantity Surveyors insurance valuation, you can ensure that your insurance policy is adequately aligned with the true costs of reconstruction. This proactive approach helps safeguard against the financial shortfall that often accompanies under-insurance, providing peace of mind that your home is fully protected. By regularly updating your insurance coverage based on our comprehensive assessments, you can better prepare for the unexpected and secure the necessary funds to rebuild without compromise.

To prepare a comprehensive replacement cost estimate for insurance purposes, we will need a copy of your house plans, if they are available.

Once we have the plans, our process involves two key steps:

1. Plan Review and Property Inspection: We will thoroughly review the provided house plans and conduct a detailed on-site inspection of your current building. This dual approach allows us to capture both the architectural details and the real-world condition of the property.

1. Replacement Cost Estimate Preparation: Based on our review and inspection, we will create a detailed like-for-like replacement cost estimate, assuming the property is completely destroyed prior to your policy expiration date. This estimate will cover the full scope of reconstruction costs, including:
   
   • Demolition: The cost to safely demolish and remove the remains of the damaged dwelling.
   • Design and Professional Fees: Expenses related to architectural design, engineering, and other professional services required to rebuild.
   • Development Application (DA) and Authority Fees: Fees associated with obtaining necessary approvals and permits from local authorities.
   • Construction Costs: The cost of rebuilding in accordance with current building codes and standards.
   • Cost Escalation: Accounting for potential increases in construction costs from the disaster date until project completion.

The final insurance valuation report will also outline all assumptions and details considered during the preparation of the estimate, providing transparency and clarity about how the replacement cost was determined.