The quantity surveying profession offers many specialisations and includes many different titles including quantity surveyor, loss adjuster, contracts manager, cost consultant, cost planner, estimator, procurement manager and tax practitioner, according to the Australian Institute of Quantity Surveyors.
A quantity surveyor (QS) is a construction industry professional with expert knowledge on construction costs and contracts. Put simply, a QS knows how much a building will cost to construct and maintain – they are ‘numbers people’ and are expert at estimating building costs. This is why they play an important role in insurance.
While insurers will use claims assessors/loss adjusters to figure out how much a property will cost to reinstate after an insured event has resulted in damage or loss, policyholders can use independent QSs to estimate those costs before any loss occurs. That is, policyholders can use a QS to get an accurate rebuild cost prior to taking out or renewing a policy, where they need to nominate a sum insured for the building.
Often, when someone takes out some form of property insurance, they’ll are required to nominate a sum insured for the building, which may include the building structure itself and other structures on the property such as a shed, fences, or underground pool. Depending on the insurer and type of policy, the policyholder may also be asked to nominate a sum insured for the contents too.
The sum insured is the maximum amount an insurer will pay out following an insured event causing damage or loss of property. It’s an incredibly important figure, not only because it’s the most that could be received following a loss but also because insurers will factor this figure into the policy premium, so it influences how much a policy will cost (and also whether the insurer will offer cover). That’s why it pays to get it right. Get it wrong and your rental could be over-insured or under-insured.
If you’re over-insured, it means you are paying a higher premium than necessary. While this sometimes happens, far more frequent is the policyholder being under-insured – it’s been estimated that up to 83 per cent of property owners are under-insured (according to a 2020 Canstar survey). Being under-insured can have dire consequences. Why? Well, underinsurance is where the amount of cover (the sum insured) is not sufficient to reinstate the property following damage or loss. Let’s say you insured your investment property for $500,000. It’s destroyed in a fire (total loss) and the cost to re-build the property is actually $750,000. The insurer will pay out a maximum of $500,000, leaving you to fund the $250,000 gap.
Neither being over-insured or under-insured is great for the policyholder, so it’s important that accurate sums insured are nominated.
This is where engaging a certified QS can prove wise. It is the QS’s ability to accurately estimate the cost to rebuild or repair a property that can make them an invaluable resource for landlords.
A QS will factor in a range of variables into the rebuilding costs they provide. For example, they will:
- use current market rates for materials and labour costs
- consider factors including:
- material supply
- material handling
- finishes, type of construction and materials
- methods of construction
- method of procurement
- construction program (i.e. the construction period and methodology associated with the construction)
- include services, landscaping and external works
- factor in inflation
- base sums on compliance with current building requirements (e.g. revised or amended planning constraints and updated building codes), including any statutory natural catastrophe risk mitigation requirements such as BAL-rated inclusions, cyclone mitigation or flood-proofing measures
- include often overlooked costs such as:
- demolition and removal of debris, including asbestos, of the original structure
- consultants’ (architects, engineers etc.) fees and preliminaries
- council fees
- account for escalation times and costs based on current project schedules.
A reliable insurance valuation report by a QS will consider all aspects of rebuilding and properly cost each element.
To summarise, the estimate provided by a certified QS can help you nominate an adequate sum insured for your rental, reducing the risk of being over-insured or under-insured and ensure that you have adequate insurance coverage for your investment property.
*While we have taken care to ensure the information above is true and correct at the time of publication, changes in circumstances and legislation after the displayed date may impact the accuracy of this article. If you need us we are here, contact 1800 661 662 if you have any questions.
You may also likeView all
If you own or manage an investment property is in a strata complex, it’s important to understand who is responsible for insuring what...