Home Insurance Large Loss - Betterment Calc Method

MaidaVale3499

I would appreciate some guidance/info re my home insurance claim and how I should plan for the betterment calculation.  Bare with me, it's hell of a saga.......

The 1963 semi-detached bungalow (and a subsidence insurance claim, instigated 2020 whilst my last parent was still alive ((my darling dad)) that I inherited from my late parents is, due to extensive and progressive subsidence,  to be be fully demolished, the new floorplan piled throughout and a detached bungalow to be built in its place. 

Initially the Insurer tried to say it was minor and non progressive subsidence caused by an exhausted rear garden soakaway and instructed painters and decorators....presumably literally to paper over the cracks.  I disagreed and instructed my own structural engineer (chartered with over 50 years experience particularly in my county).  After inspection pits etc, my SE advised that the subsidence was major/progressive and the damage it had caused to my bungalow could not be repaired to produce mortgageable property and a detached rebuild was required.  When I submitted this report to my Insurer they, after 12 months of further action:   crack and stud monitoring, full levels survey, another 14 inspection pits, ground drilling (how deep to get to mudrock) agreed with my SE.  (They subsequently hired my SE for the demolition/rebuild.)

It was the Insurer's/my structural engineer and the Insurers subsidence specialist consultant, after lengthy and multiple inspections and tests advised that:

1.   my property could not be repaired to a standard where the property would be fully mortgageable

2.  The rebuild of my bungalow would have to be detached as if re-built as semi-detached this would present an ongoing risk to the adjoining, and also, subsiding bungalow.  This ongoing liability was unacceptable to my Insurer and hence they pursued the detached rebuild option.

My insurer has accepted full liability and has instructed its subsidence claims handling supplier (let's call them XYZ Ltd) to "support" me with the claim.   I rejected their offer to buy me out of the claim, preferring instead their 2nd option to me ....of the full  demolition and rebuild route.  They confirmed that my buildings insurance cover is £1m which more than covered this option.

XYZ Ltd hired my SE for the demolition and rebuild and furthermore asked him to recommend a local architect....who they subsequently instructed to design a replacement detached bungalow.

XYZ Ltd agreed to my proposal that should I wish to have a larger/upgraded (beyond what was required for like/like and/or current building regs) property that I would fund that difference in cost.  I'm completely fine with that as I recognise the insurance principle that "no-one should profit out of a loss". 

The architect produced a design that has a reduced width compared with my original bungalow due to my having to give up land for:

i)  so the current party wall becomes an insulated external wall for my neighbour'sproperty.  Ditto my new external wall.

ii) increase the width of the rebuild's rear access path as my SE advised distancing the rebuild from the neighbour's property.

Due to the reduced width the rebuild needed extra depth to replace the lost square meterage.  However, due to planning restrictions, ie not being able to increase the roof ridge, we could not go deeper without losing head height in the loft  which in a bungalow is a valuable asset that i wanted to retain.  To that end we have ended up with both a front and a rea extension to deliver no reduction in sq meterage  useable shaped rooms...and also to be able to get all the doors off the more challenging hall shape on the new squarer floor plan.  

The architect also confirmed to me and XYZ Ltd that to obtain planning permission & building regs approval certain eco/environmental additions would be necessary, these include:

a)  solar panel 4kw system & battery  (this was upgraded to 5kw system by the SAP consultant that the Architect consulted to review his draft specification for Building Regs submission)
b)  improved roof trusses to bear weight of solar panels
c) improved insulation across whole build

The architect also proposed a block/Krender build rather than in his words, the hideously expensive like/like Ibstock gold bricks.  I was happy to agree.

XYZ also welcomed my enquiry re if I found and funded my own alternate accommodation and made build savings compared with current (no chimney breast, no fireplace, no wallpaper on walls or ceiling) and confirmed that these could be offset against any betterment....which they knew I was planning and had discussed with them, as follows, not exhaustive but to give you an idea:

1) Increased kitchen floorplan size (more units, more floor coverings, more tiles etc required)
2)  Upgrade to stone/quartz from laminate worksurfaces
3) Add a cloakroom and fittings to Ground floor (within new front extension)
2)  Add staircase, Convert loft to create master bedroom and EnSuite

Finally I get to my Question:

In the above complex situation how will betterment be calculated so as to be fair to both parties ......as even without any of "my betterment choices" I appreciate I will be getting a detached brand new bungalow in lieu of a somewhat dated 1963 semi-detached bungalow.

(I have compiled a detailed and full fixtures audit of current bungalow by room including floor size, number of windows, window type, number of openings, eletrical sockets  kitchen cupboards, size  number and quality etc etc)

Ideally I want to have a data driven betterment calculation rather than emotional subjective (conflicting) opinions.

THANK YOU to anyone who has reached the end if this.

XRS200

I'll admit i didn't read much of this.  Are the insurers requesting a betterment contribution?  

Could a surveyor give you a pre damage valuation and a post rebuild valuation?  Surely the betterment is the difference in market value.

MyRealNameToo

MaidaVale3499 said:
XYZ Ltd agreed to my proposal that should I wish to have a larger/upgraded (beyond what was required for like/like and/or current building regs) property that I would fund that difference in cost.  I'm completely fine with that as I recognise the insurance principle that "no-one should profit out of a loss". 

Betterment is fairly common in Home insurance, most policies are written on a new for old basis rather than indemnity.

MaidaVale3499 said:
Ideally I want to have a data driven betterment calculation rather than emotional subjective (conflicting) opinions.

In short, it's not straight forward when you can't simply go to a shop and buy the same thing again. 

In principle they should cost estimate what the cost of the nearest equivalent would have been and you pay the difference between that value and what the rebuild actually costs. The difficulty comes in the definition of what like for like is when all are in agreement that certain things can't be repeated. 

With more simple things like TVs there is often arguments over if you can replace a Sony with a HiSense or if the loss of 3D is material etc. Ultimately replacing a premium tv from 10 years ago with a budget/mid-range is likely to be betterment but on a new for old basis thats acceptable but doesnt mean you are automatically entitled to the latest top of the line Sony either. 

It will be a negotiation like the TV, particularly if you are accepting downgrading materials but its questionable if the higher grade blocks were strictly necessary to get a like for like

MaidaVale3499

XRS200 said:

I'll admit i didn't read much of this.  Are the insurers requesting a betterment contribution?  

Could a surveyor give you a pre damage valuation and a post rebuild valuation?  Surely the betterment is the difference in market value.

 I suspect your calc method is how Insurance adjusters would like to calculate it eg Detached 4 bed £495k minus £300k (current pre damage 3 bed semiD)

But......several builders have given me estimated cost of the extra building work that I want (excluding anything required to support integrity of new build eg going detached or to meet current buying regs ).....and these figs are £50k to £60k .ie a huge difference. 

Okey00001

Hi there, your post came up in my search - so I asked AI for you, and this is the response:

• Know what your insurance covers for subsidence.

• Keep detailed records and evidence of damage.

• Use trusted structural experts for clear reports.

• Expect insurance to pay for like-for-like repair, not upgrades.

• Pay for any extra improvements yourself.

• Agree with the insurer in writing about any upgrades you want.

• Use your detailed audit and expert reports for fair calculations.

• Stay organized, patient, and communicate clearly with your insurer.

This keeps things fair, transparent, and smooth during your claim and rebuild process.

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• The insurer usually calculates betterment by comparing the rebuilt property's value with the original property's value.

• Your builders’ extra costs for the upgrades you want should be treated separately from this basic calculation.

• The insurer covers the cost to rebuild like-for-like plus required legal and structural changes.

• You pay yourself for any extra upgrades beyond that.

• Use detailed builder quotes and your audit to show clearly what costs are essential and what are extra.

• This makes the betterment calculation fair and avoids disagreement.

• If unsure, consider getting an independent expert to help clarify and negotiate the betterment amount.

This keeps the calculation transparent and fair for both sides.

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It is timely and it seems you have already done a lot of legwork. Hope it all works out sooner.