RCA Guide
Why you need a Reinstatement Cost Assessment
An RCA is the cost to demolish the building and rebuild it as new. It includes demolition, professional fees and the statutory costs that sit with a rebuild. It is not market value, and it is not a mortgage valuation.
The RICS cycle
RICS professional standards set a clear cycle. This is not optional “nice to have” advice. It is how a professional assessment is meant to be kept current:
- A professional RCA every three years — or sooner if the building is altered.
- An annual adjustment or desktop review in the years between, to reflect inflation and change.
Where existing assessments and building information are reliable, a desktop appraisal may be appropriate. Where they are not — or the building has changed materially — a fuller instruction is discussed first. An annual review keeps a sound figure from going stale; it is not a substitute for a proper starting assessment.
Underinsurance and the average clause
If the building is underinsured, the insurer can reduce any claim in proportion — not only a total loss.
They look at how much of the true rebuild cost you insured, then pay that same share of the claim — not that share of the sum insured.
Interactive example
What might the average clause do?
Move the sliders. The simplified illustration is: claim × (sum insured ÷ true rebuild cost).
For illustration only. Not advice. Actual settlements depend on policy wording and circumstances. No reliance should be placed on these figures.
£200,000 × (£600,000 ÷ £1,000,000) = £120,000
You insured 60% of the rebuild cost, so 60% of this £200,000 claim may be paid — £120,000. You may need to find £80,000.
Figures rounded. Policy terms prevail.
Over-insurance
A figure that is too high does not increase the claim payout. Insurers pay the reasonable cost of reinstatement, not the inflated sum on the schedule.
You simply pay a higher premium every year for no extra benefit at claim stage.
The problem with relying on index linking alone
Index linking is useful between proper assessments. It is not a substitute for one.
- It does not fix a wrong starting figure.
- If the baseline is too high, each annual uplift compounds the error and inflates premiums.
- If the baseline is too low, index linking can still leave you underinsured.
Simple illustration: start 20% too high, then add 5% a year. The gap does not close. It grows. The same is true the other way if you started too low.
Novum’s approach
- A professional RCA, scoped to the building and the information available.
- Desktop appraisal where records are good — using previous assessments, current cost indices and any changes you report.
- A fuller instruction where information is incomplete, or the building has changed materially.
- Optional annual desktop reviews so a sound figure stays current between assessments.
- A small annual fee for accuracy is cheaper than years of the wrong premium — or a reduced claim.
Common questions
Do I need an RCA if my policy is already index-linked?
Yes, you still need a correct starting figure. Index linking only moves the last number. If that number was wrong, the policy stays wrong — just a bit higher each year.
What if my last assessment was only two years ago?
RICS sets a professional assessment every three years, or sooner if the building has changed. If nothing material has changed and the last assessment is sound, an annual desktop review may be enough. If there have been works, a change of use, or you have only ever indexed an old figure, a new professional RCA is usually the right next step — desktop or otherwise, depending on the information available.
Will a more accurate (sometimes lower) figure reduce my premium?
It can. Premium follows the sum insured. If a proper RCA brings an overstated Declared Value down, you are no longer paying for cover you do not have at claim stage. The premium decision sits with the insurer or broker — the assessment gives them the right number.
How does the insurer know the rebuild cost if only part of the building is damaged?
They do not need a tender for rebuilding the whole property. On a claim, the loss adjuster estimates what it would cost to rebuild the entire building as new — from inspection of the damage, the rest of the property, drawings, and cost data. That estimate is compared with the sum insured. If they judge the sum insured to be too low, average can be applied to the claim in front of them, including a £100,000 repair.
What is a desktop appraisal?
A professional review of existing assessment data, updated for current rebuild costs and any changes you report. Where that information is good, a desktop appraisal can be an appropriate way to update or maintain the figure. It is not the same as a blanket index uplift applied in isolation.
This page is for general information only and does not constitute advice. No liability is accepted for reliance on it. Policy wording and professional advice should be obtained in respect of any building or claim.
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