Reinstatement value for listed and older pubs: are you underinsured?
Why the buildings sum insured on an old or listed pub should be the cost to rebuild it properly, not what it would sell for, and how the average clause can cut a claim.
By Tapwell editorial
Many UK pubs are old buildings, and a good number are listed. That makes the buildings sum insured one of the most important figures on the policy, and one of the most often wrong. The figure should be the reinstatement cost: what it would cost to rebuild the pub after a total loss. It is not the market value, the price you paid, or the figure on your lease.
Market value and rebuild cost are different numbers
Market value reflects trade, location and the property market. Rebuild cost reflects materials, labour, demolition, site clearance and professional fees. For an old pub with solid walls, timber frames, stone or slate roofs, the rebuild cost can be far higher than the sale price, especially where the trade is modest.
Why listed status raises the cost
- Listed building consent is normally needed for rebuilding work, and the planning authority may require like-for-like materials and methods.
- Specialist trades such as lime plastering, thatching, stonemasonry and heritage joinery cost more and can take longer to book.
- Professional fees (architects, surveyors, heritage consultants) are usually higher on listed work.
- Longer rebuilds mean a longer period of lost trade, so business interruption cover needs a long enough indemnity period too.
The average clause: how underinsurance cuts a claim
Many commercial policies include an average (or 'underinsurance') condition. If the sum insured is lower than the true reinstatement cost, the insurer can reduce any claim, even a partial one, in proportion. For example, if a pub is insured for £600,000 but would cost £900,000 to rebuild, it is insured for two-thirds of its value. A £90,000 fire claim might then be settled at around £60,000.
Getting the figure right
- Get a professional rebuild cost assessment from a chartered surveyor, ideally one with heritage experience for listed pubs.
- Review it every few years, and update it each year for building cost inflation.
- Include outbuildings, boundary walls, car parks, signage and beer garden structures.
- If you are a tied tenant, check what your pub company is insuring the building for, and on what basis.
How Tapwell can help
When we quote, we ask about the age, construction and listing of your building so the cover matches it. If you are not sure your current sum insured is right, call us on 0333 050 2088 or request a quote and mention it in the additional information box.