Insurance definitions: Sum Insured vs Declared Value (Reinstatement Value)

Below is our simple definition of a concept that often causes confusion – we hope this if of use:

Sum Insured

The sum insured is made up of two elements being a “Declared Value” and an “Inflation Provision”.

The Declared Value or Reinstatement Value

The Declared Value is the cost of rebuilding the premises insured on the first day (Day One) of each period of insurance. As long as this figure is adequate on that day any claims will be free of average. If it is inadequate it is possible that average could be applied meaning that any valid claim payout would be proportionally reduced by the amount that the property is deemed underinsured.

The Inflation Provision

This is the percentage uplift designed to cover inflation during the insurance year and during the subsequent period required for designing, planning, tendering and actual reconstruction, however long that might take. This is usually 30% of the Building Declared Value.

Conclusion

Therefore the key figure for obtaining an insurance quotation is the Declared Value / Reinstatement Value. Meanwhile the Sum Insured in more of an arbitrary, but nonetheless important, figure.

Often, over time, the Reinstatement Value of the building moves out of sync with its ‘market’ level. An insurance re-valuation may be worthwhile, and its cost may be recoverable from the Lessee.

In order to partly adjust for this, we automatically uplift the reinstatement values in line with the inflation level as advised by the RICS (Royal Institute of Chartered Surveyors) each year on renewal. Nevertheless, a reinstatement valuation is normally recommended every 3 years.

If you require a competitive insurance quote for your property, or any further clarification, don’t hesitate to get in touch.

Current Opportunities

Current Opportunity

Retail & HMO, Southall

2-6 The Broadway, Southall, UK View on map
6701 sq ft
Call for price
Current Opportunity

Tesco Express, Twickenham

246 Powder Mill Lane, Hounslow, UK View on map
Gross Yield % 5.5
4157 sq ft
£ 2,300,000
Current Opportunity
9968 sq ft
£ 450,000
Current Opportunity

Tesco, Shepherds Bush

Tesco Express, 31 Uxbridge Rd, London W12 8LH, UK View on map
Gross Yield % 5.5
3800 sq ft
£ 2,200,000

Vacant, Wokingham

68-70 Peach Street, Wokingham RG40 1XH, UK View on map
6242 sq ft

McDonalds, Wolverhampton

50 Dudley Road, Wolverhampton, UK View on map
10462 sq ft

Nail Salon, Chelmsford

33 Springfield Road, Chelmsford, Essex CM2 6JE, UK View on map
830 sq ft

Ladbrokes, Camberley

Park Street, Camberley, Surrey GU15 3PL, UK View on map
1000 sq ft

Rohan (Outdoor Clothing), Chelmsford

35 Springfield Rd, Chelmsford CM2 6JE, UK View on map
Gross Yield % 7
830 sq ft

Costa Coffee, Bournemouth

1577, 1581 Wimborne Road, Kinson, Bournemouth BH10 7BB, UK View on map
1823 sq ft