BUILDINGS INSURANCE – VALUE OR REPLACEMENT COST?
Often there is a misinterpretation for the purposes of buildings insurance relating to the sum to insure a property for.
People often confuse the word ‘value’ as opposed to the ‘reinstatement cost’ of the property.
We prefer to use the phrase ‘reinstatement cost’ as this reflects the true cost of reinstating the property if there is an insured event.
A reinstatement costs will include such things as the demolition and removal of debris, the rebuild cost, fees, etc.
The reinstatement cost should not be confused with the market value of the property. Reinstatement cost and market value of the premises rarely are the same and the market value is not the figure to use as a sum to be insured, unless there is some specific reason to do so.