Commercial Property Insurance Sum Insured

Protect your property investment

Did you know that 83% of Australians are underinsured on their properties? That’s why it’s important to take some steps to protect your property investment. Most people get insurance based on the purchase price of the property, or an updated valuation assessment. But that doesn’t take into account all the additional costs in the event of substantial destruction to your property.

An accurate replacement cost estimate (also known as an insurance valuation report) will ensure you have all the information you need to adequately insure your property. These reports estimate the actual cost to rebuild an asset, allowing for other often overlooked factors such as demolition, professional fees and escalation.

Without an assessment of the accurate cost, you could be either over-insuring your property and paying too much for insurance, or more than likely, under-insuring and not having enough coverage in the event of damage or loss.

Disasters can and do occur to many buildings and infrastructure assets during their lifetime, with fire being the main risk. However, depending on location, your property could be subject to other risks such as floods, hailstorms or cyclones, resulting in devastating and costly damage.

A replacement cost estimate ensures that you have adequate insurance coverage for your property. You can have a look at our insurance calculators here.

What items are included in an replacement cost estimate?

A replacement cost estimate typically covers the following components:

  • The demolition and removal of debris and asbestos of the original structure, including all associated consultant fees;
  • The cost of reconstructing a new building considering and revised or amended planning constraints and updated building codes;
  • All consultant fees and preliminaries;
  • Cost Escalations for time taken to complete assessment, design, tender evaluations, construction periods and new policy renewal dates.

Who needs a replacement cost estimate?

If you are an owner, landlord or developer of a commercial, industrial, or retail property, you should obtain a replacement cost estimate report.

Owners of residential properties, including apartment blocks/strata titles and bespoke/architecturally designed houses, may also need to obtain a replacement cost estimate.

The value of your property will change over time and it’s important to make sure that your insurance keeps pace with these changes.

Is a replacement cost estimate the same as an insurance valuation report?

Yes. Both terms relate to a report that has the same purpose. Replacement cost estimates can be referenced differently across different industries; some of these include:

  • Replacement Cost Estimate/Report
  • Insurance Replacement Valuation
  • Insurance Replacement Cost Reports
  • Replacement Cost New Assessment

How much does a replacement cost estimate cost?

MCG Quantity Surveyors are currently offering a fixed rate of $600 plus GST for standard Cost Replacement Reports.

How often should I update my replacement cost estimate/sum insured?

After the initial report, it is standard to update that cost each year, applying a percentage for escalation. It is unnecessary to prepare a full replacement cost report every year replacement every year however, a full review should be undertaken at least every 3 years, with no longer than 5 years between updates.

It is also recommend a full review be completed following any major renovations or upgrades.

The last thing you want to have to think about when your property has been damaged, is whether or not you can afford to rebuild. Knowing that your insurance is based on an accurate replacement cost estimate will enable you to get on with rebuilding your home or business, exactly as it was, in the shortest possible time.

Talk to one of our Qualified Practicing Insurance Brokers on (07) 5482 7485 today about how to make sure you have a professional protecting your property investment.

Published On: December 1st, 2022Categories: Commercial Property, Commercial Property Insurance

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