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A valuation survey will usually include a reinstatement value. The reinstatement value is not to be confused with the valuation. Here’s an explanation of what it is and why it matters.

What is a reinstatement value?

A reinstatement value of a property is the amount it would cost to rebuild it from scratch completely. It may have been brought to the ground by fire or another catastrophic event, or it may be so dilapidated, it needs to be knocked down. Either way, it is crucial to know the cost of reinstating it if the worst-case scenario happens.

The surveyor uses specialist equations, software and local knowledge to calculate the reinstatement cost figure. The variables used in these equations may differ depending on the local area and the construction techniques used. For example, labour costs would be less in the North-West than in London, so the surveyor considers variables like this.

Why does it matter

The reinstatement figure is of particular importance when taking out building insurance. Ideally, you need your insurance to cover you for the maximum amount of loss possible, which is where your reinstatement figure comes in. The reinstatement figure is the maximum level of cover you should take.

You should review the level of insurance you have periodically, as the cost of construction can increase over time quite rapidly. To make sure you have the correct level of cover, you can instruct a surveyor to calculate the reinstatement cost figure. Reinstatement values can be done on their own, but they are usually included in a full valuation and in Homebuyers reports (Level 2) where a valuation is included.

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The material contained in this article is intended for information purposes only and not as advice. We take no responsibility for the result of any actions you take as a result of reading this information.

You should always obtain relevant professional advice prior to making investment decisions.

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