What is a reinstatement cost assessment?

The short answer

A reinstatement cost assessment (RCA) is a calculation of what it would cost to rebuild a property from scratch if it were destroyed — the sum the buildings-insurance policy needs to cover. It is the basis on which the “sum insured” or “declared value” on a policy is set. It includes the construction cost plus the extras a real rebuild incurs: clearing the site, professional fees, VAT where it applies, and a provision for inflation between now and a future claim.

It is most often prepared for commercial property, blocks of flats, listed and non-standard buildings, and anywhere the owner needs confidence the policy figure is right rather than a rough estimate carried forward year after year.

In the UK it is carried out to the RICS professional standard Reinstatement cost assessment of buildings (3rd edition, 2018, reissued June 2024), which sets the basis, the mandatory caveats, and how often an assessment should be revisited.

Why it matters — underinsurance and the average clause

If the sum insured is set too low, most policies apply the “average” clause: the insurer scales any claim — even a small, partial one — down by the same proportion that the building was underinsured. Insure a building for half its true rebuild cost and a £100,000 fire claim can be settled at £50,000. A properly evidenced RCA is the defence against that, which is why brokers and insurers ask for one and why it is worth getting right.

RCA is not market value — the common confusion

This is the point clients most often get wrong. Market value is what the property would sell for today, and it includes the land. Reinstatement cost is what it costs to build the structure again, and the land is irrelevant — you still own the plot after a fire. The two figures are unrelated and can diverge sharply in either direction: a modest terrace in an expensive city may have a market value far above its rebuild cost, while a large, remote, or architecturally complex building can cost far more to rebuild than it would ever sell for.

What goes into the figure

A defensible RCA builds up from recognised cost data rather than a gut figure. The usual source is RICS BCIS (Building Cost Information Service) rebuilding-cost data — per-square-metre rebuild rates by building type, adjusted by location and quality — with allowances added on top:

• Build cost — gross internal/external area × the applicable BCIS rebuild rate, with locality and quality factors applied.
• Demolition & site clearance — removing what's left before rebuilding can start (commonly around 5% of build cost).
• Professional fees — architect, engineers, project management, planning and building control (commonly around 12–15%, and higher — 15–20%+ — for listed or complex buildings).
• VAT — where it applies and is not recoverable. A total rebuild of a dwelling is normally zero-rated, but partial repair, demolition, professional fees, and all work to listed buildings attract VAT at the standard rate — so the VAT question turns on the works and the building, not just the client.
• Contingencies and an inflation provision — to keep the figure adequate between now and a future rebuild.

Standard BCIS rates are built for conventional construction. Listed and non-standard buildings — heritage fabric, hand-made materials, traditional trades — can cost several times the standard rate to reinstate and need a bespoke build-up rather than a straight BCIS figure. Recording the BCIS data version used lets a reviewer replicate the calculation.

A common point of confusion is how this figure relates to the sum insured. What the surveyor produces is the declared value — the full rebuild cost at today's prices, before any inflation allowance. The policy then protects that figure against construction inflation in one of two ways. On a Day-One basis the insurer adds a fixed percentage uplift (commonly 15%, and often more for long or complex rebuilds) on top of the declared value, to cover inflation during the policy year and the rebuild period. On an index-linked basis the sum insured is instead adjusted at each renewal in line with a building-cost index. Either way, the surveyor's job is to get the underlying declared value right — the uplift or indexing is applied by the insurer.

How often should it be refreshed?

Rebuild costs move with construction inflation, so a one-off assessment goes stale. Common practice — and the approach insurers tend to expect — is a full professional assessment periodically, often every three years, with the figure indexed annually in between using a recognised building-cost index. A building that has been extended, altered, or changed use should be reassessed sooner. (Check the specific policy wording and any current RICS guidance — intervals are conventions, not a fixed legal rule.)

Who can prepare one?

An RCA is normally produced by a chartered surveyor with relevant building-cost experience — typically a building surveyor or quantity surveyor (MRICS or FRICS). The signed assessment records the surveyor's qualifications and professional indemnity position, which insurers and brokers may ask to see as supporting evidence for the declared value.

What an RCA does not cover

An RCA is for buildings-insurance purposes only, and it is easy for a client to expect more from it than it gives. An RCA does not:

• comment on the condition of the building or any defects — that is a survey, not an RCA;
• cover contents, plant and machinery, stock, or tenant's fixtures;
• cover loss of rent, business interruption, or alternative accommodation — those are separate heads of policy cover;
• give a market value, or any figure for lending, sale, or investment.

How SurveyorSuite fits this

The Reinstatement Cost Assessment template builds the figure up the way described above: BCIS-driven per-element rates with locality and quality factors, the standard allowances, and both Day-One and Index-Linked totals, finishing with a signed surveyor's declaration that records the BCIS data version. The cost figure comes from deterministic calculation, not AI — you set the factors and sign the declared value; the optional AI only drafts the descriptive narrative.

See the Reinstatement Cost Assessment template →