Did you know that 83% of Australians are under-insured on their properties?
Protecting your property investment
Did you know that 83% of Australians are underinsured on their properties?
That’s because insurance is typically 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.
Did you also know that if you are under-insured, insurance companies may only pay out a pro-rata amount of the damage? This may mean the difference between being able to rebuild your property or having to compromise for a lesser replacement.
An accurate replacement cost estimate 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 will 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.
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.
MCG Quantity Surveyors will ensure that the cost to replace your asset is accurately identified for insurance purposes.
Replacement cost estimates cover:
- Demolition and removal of debris, including asbestos, of the original structure
- Cost of reconstructing a new building, including any planning requirements
- Consultants fees and preliminaries
- Escalation costs
Before you buy a property
You can’t just rely on the insurance currently being paid by the vendor.
In the same way you would complete due diligence on other operational items such as rent and maintenance expenses, it’s crucial that you understand the complete replacement cost of a building and its effect on insurance premiums before you buy.
MCG Quantity Surveyors can help you obtain an accurate projection of ongoing insurance costs prior to an acquisition.
Correct insurance coverage for the property that you own
The value of your property will change over time and it’s important to make sure that your insurance keeps pace with these changes. Be confident that you are adequately insured at all times with an up to date replacement cost estimate from MCG Quantity Surveyors.
Helping you sell when the time is right
Selling your property can be a complicated process. Demonstrating the accurate costs to replace the asset in a worst case scenario of total or partial loss, can streamline the sale, and get money in your pocket, faster.
Frequently asked questions
Why do I need a replacement cost estimate?
Replacement cost estimates will identify your full costs in the event of partial or total loss to your property, whether it be by fire, flood or some other natural disaster. These estimates are required for insurance purposes and may be necessary when insurance is being taken out or when a disaster has occurred.
A replacement cost estimate ensures that you have adequate insurance coverage for your property.
What items are included in a 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 need to 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.
Important Note: It is NSW policy that ‘The Owners Corporation’ has a duty to cover all buildings in the Strata Scheme under a Damage policy with an approved insurer. NSW policy notes that a valuation of the building replacement cost must be carried out by a qualified Quantity Surveyor or valuer, at least once every 5 years and increased to reflect the new valuation amount.
The only exception to this is that the building cover requirement doesn't apply to 2-lot schemes (referred to as small schemes). This relates to buildings that are detached and no building or part of the building in the Strata Scheme is situated outside those lots. However, the two owners must decide by unanimous resolution that the Owners Corporation will NOT be taking out building insurance.
Why do Quantity Surveyors provide replacement cost estimates?
MCG Quantity Surveyors are experts in construction costs. This expertise allows us to be recognised as the most suitably qualified professionals to advise the insurable value of a property. Leveraging an extensive database of construction costs, we can provide property owners with an accurate insurance amount in the form of a replacement cost estimate.
Being independent and impartial to all parties, we can provide a trusted and experienced assessment to protect the property from being over or underinsured.
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
What will be provided in my replacement cost estimate report?
The replacement cost estimate report will include:
- reference to the property address as listed in the Registered Plan
- a description of the building structure, services and finishings
- works external to the building in accordance with the insurance policy
- building areas
- summary of costs
How much does a replacement cost estimate cost?
MCG offer a base rate of $600+GST for any property type (Domestic, Commercial, Industrial, Rural etc.) that falls into the following category :
- Architectural Floor Plans are available (scaled drawings).
- The current sum insured amount does not exceed $10m.
- Non remote areas.
How long will it take to get my report?
As we are a national company, we can get properties within Australia inspected and the report prepared within 7-10 business days.
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.
We would also recommend a full review be completed following any major renovations or upgrades.