HH24 - 12.09.14 - One last rant!

If I tried to insure a car, and told them it would cost me £15,000 to replace a 20-year-old Fiesta, the insurance company would likely tell me I'm 'having a laugh' and (maybe) provide a quote for £500, and that would be Third Party cover only.

If I wanted to know the replacement value before calling the insurers I could look up in Glass's Guide how much  the hypothetical Fiesta would be worth...

But I really can't be bothered for this example - what I'm trying to say is that the information is easily obtainable by registering with a website, or you can work it out for yourselves reasonably well by surfing Exchange & Mart and looking at several examples of replacement costs for what you want to insure.
Where that system falls down is if the 20-year-old Fiesta belonged to (for instance) Kurt Cobain - as an old car, it's worth diddly, as a piece of memorabilia it could be 'worth' a ridiculous sum; it would certainly cost a daft amount of money if you bought it with good provenance from a specialist celebrity vehicle auction.

So what's the insurance valuation?

Well, you'd have to go to a specialist insurer who would need to take advice from their underwriters, and each case would be different...

Point is: I can't dictate to an insurer how much to insure my bog-standard car for; it's entirely in their hands, they know the replacement value and won't let me go over that without an awful lot more effort on my part.  I may even have to go to a specialist insurer.

Now with a house, the insurance company expects me to know the rebuilding costs - why?  I could understand if it was a complete one-off architect designed original that was newly built [owner would have all the costs to hand]...  But for an ordinary place, the insurers have a much better idea than a purchaser ever could.

They are the ones that pay to have houses re-built, they have access to underwriters, and if you have ever looked into it you will know there is absolutely no correlation between asking/sale price [often roughly in the same ball park] and quoted re-build costs.

There is also absolutely no correlation between how much the insurance industry could get your house rebuilt for and how much it would cost you as a private individual to build that house...  [Have you ever watched Grand Designs? Developers wouldn't sell houses for less than £200,000 if the minimum build cost was £350,000 (that's why they "sat" on so much land with planning permission while the housing market was in the doldrums; not enough profit), so they can get a house built cheaper than almost everyone Kevin followed.]

So how can I know how much it would cost to rebuild a three bedroom chalet bungalow? 

As an example: before I sold the freehold of the house in Brixton my specialist "Landlord Insurance" broker was happy for me to over-insure the property, so I paid for rebuild costs of ~£220,000 rather than the £170,000 they said it would cost...

The asking (and sale) prices for such places was ~£750,000

And those were virtually identical rows of terraced houses, so lots of comparisons available.  I still had no way of finding how much it would cost the insurance company to rebuild it for me if it needed it.

According the Glen (the unhelpful valuation surveyor), three bedroom chalet bungalows are ten-a-penny in the area (and not worth very much; the Kentish equivalent of a Brixton terrace), so insurers must know how much they would cost to rebuild and so are insured for...

So why do they expect the prospective purchaser to know the rebuild costs?

They have massive databases at their disposal, they share data with all their competitors [when it suits them], so why is the onus on us?

Thankfully either Claire or the broker she used came up with a rebuild value, we can afford it, the one-off structural movement [did I mention that?  I forget; it moved following the drought in 2003 with all the attendant cracking.  We had a follow-up visit by the same structural engineer whose report confirmed that it was no longer moving (so didn't have subsidence, but had moved)] didn't put them off, and the excess was the £1,000 that is the most mortgage lenders will contemplate these days.

[Phew]

But, seriously, insurers know your own business, don't expect me to learn it for you!

[Completely unrelated: ooh, and I've just discovered about "jump breaks", so hopefully I will go and edit recent posts to make this and them so much less unwieldy!]