From: John Laird 
Newsgroups: uk.finance
Subject: Re: Buildings insurance rebuild value, is this right?
Date: Fri, 14 Nov 2003 13:08:52 +0000

On Fri, 14 Nov 2003 10:26:03 +0000 (UTC), "Terry Harper"
 wrote:

>I had the opposite situation, back in 1978, where the mortgagee wanted me to
>insure it for 20% above the purchase price. They were told in no uncertain
>terms that this was nonsense, since the price included the cost of the land,
>and the house itself had been no more than 75% of the total. In the end they
>settled for a rebuilding cost of 80% of the purchase price, which was still
>probably over the top but safe.

It's not, by definition, "nonsense" for rebuilding costs to exceed purchase
price.  The former has to include the costs of removing whatever is left
after whatever disaster has befallen the house, for a start.  It is
calculated on the basis of floor area, construction style, and prevailing
rebuilding rates (which you can guarantee are a darned sight more than
building rates due to the distress nature of the contract).  The purchase
price is a purely market driven entity, although if it falls far enough the
site will be ripe for redevelopment.

[I sense you may have been referring to a new build.  Even so, you have to
factor in the site clearance costs and the difference between build and
rebuild rates.]

-- 
Welcome to the jungle.  Please observe our laws. 

Mail john rather than nospam...