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UK care and retirement homes are very specialised environments. Not only are they long-term accommodation settings with services in place for people in need of extra help, but they often provide specialised medication and care, regular nutritional meals, and enrichment activities. 

Unfortunately, these unique accommodation settings and their facilities are at risk of being underinsured. Assets are often insured based on market values, or using incorrect benchmarks, rather than actual reinstatement costs. This gap leaves those in the care and retirement sector at risk of financial losses in the event of a claim. 

In this article, we will discuss the complexities of accurate insurance reinstatement cost assessments for care and retirement homes. Adequate insurance is essential in ensuring smooth business continuity and continued support for residents. 

Understanding the care sector

There’s many different types of care and retirement homes available in the UK. With various levels of support and community aspects on offer, there is a setting to suit every individual need.

  • Retirement villages: focused on independent living. Villages usually consist of individual leasehold units, such as flats or bungalows, with optional communal spaces. Facilities for retirement homes also include housekeeping and transportation. They are suitable for adults over the age of 55 who are ready to retire and downsize their home. 
  • Assisted living, or extra care housing: a hybrid model between independent living and care homes. Residents have their own home with carers visiting them to provide care and assistance. Their services include help with tasks such as meal preparation, medication, cleaning, bathing, and dressing. 
  • Residential care homes: long-term accommodation settings for people in need of extra daily help, providing specialised medication and care, regular nutritional meals, and enrichment activities. They are best suited for those who require monitored care and assistance.
  • Nursing homes: focused on providing 24/7 medical care and assistance with key medical infrastructure and highly qualified nursing staff. 

Each of these settings provide expert services and amenities for residents to receive a quality standard of living. Let’s explore the five factors that are influencing reinstatement costs for this industry. 

1. Specialised infrastructure and medical care services

For nursing and residential care homes specifically, healthcare is a huge part of the service offering, and is often why residents are there. When assessing the reinstatement costs of these homes, it is a critical mistake to underestimate this aspect. These homes often have additional care or medical facilities that make them complex environments, with corresponding costs. 

Unlike standard homes, the care sector requires medical-grade sanitation to prevent infection amongst residents, for example:

  • A robust valuation must account for the installation of clinical waste disposal rooms or sluice rooms, which require specialist plumbing and ventilation. 
  • Commercial-grade laundry facilities are also a crucial requirement, and they are usually capable of thermal disinfection. These are far more expensive to reinstate than domestic or lower grade commercial utility rooms. 

Reinstatement costs must also reflect any hardwired nurse call systems in residents’ rooms and communal spaces. Facilities may include advanced access control for dementia units, with wandering detection systems and magnetic door locks aiding patient safety, all of which come at increased cost compared with non-care facilities. 

There’s also a higher cost in terms of the facilities for transporting residents to and from hospitals and medical appointments. For example, standard six-person lifts are rarely sufficient for nursing homes. Reinstatement costs must include for installed bed lifts or evacuation lifts capable of transporting a resident, or accommodating ambulance stretchers. 

Finally, valuations must reflect clinical areas, such as temperature-controlled treatment rooms for storing prescription medication, and kitchen infrastructure to produce specified medical diets at scale. 

2. Regulatory betterment and standards

In the case of reinstatement for care homes, you cannot usually rebuild it ‘as is’. Instead, you must rebuild to current building and regulatory standards.

Reinstatement valuations must account for changing building code including enhanced fire safety, such as fire-retardant materials and sprinkler systems, which are becoming increasingly mandatory in new care developments. 

Under modern energy regulations, a new build will likely require enhanced thermal energy standards compared to the existing building. There may also be pressure to incorporate heat pumps and solar panels, even if the original building had none of these features. 

Healthcare facilities must be reinstated to meet current clinical standards, not merely like-for-like. For example, if you were to rebuild a dementia wing, it would likely need to be rebuilt in compliance with the latest infection control regulations, including enhanced ventilation systems, and patient safety protocols. 

Older buildings used for care homes typically operate with smaller resident rooms. These are unlikely to pass planning permission or CQC (Care Quality Commission) standards today. In a total loss situation a rebuild must meet modern space standards to ensure both accessibility and a better quality of living standard. For accommodation, this could increase the room footprint and introduce an ensuite wet room. This requirement often means that to reinstate the same number of beds, the new building must have a larger physical footprint, which will increase the cost per bed. 

Declared values to insurers are based on the same footprint as the existing building, but reflecting any additional building and regulatory standards. If a larger building is needed to accommodate the existing number of occupants, the operator may need to find additional finances to fund the difference.

3. Demarcation of assets – buildings vs contents 

One of the most common causes of friction in insurance claims is what constitutes the building, and what counts as contents. In the care sector, where medical equipment and facilities can be fixed to the building, getting this distinction right is crucial. 

  • Buildings: typically fixed items attached to the structure of the property, such as fitted hoists, grab rails, nurse call points, and reception desks.
  • Contents: loose items such as beds, furniture, medical trolleys, and televisions. 

Incorrectly identifying items as buildings or contents can lead to a care home owner paying to insure the same assets twice. Or worse, where insurance for each element is arranged by separate parties, assets could end up uninsured. 

Retirement villages have leasehold arrangements that can come with ambiguity regarding whether the operator’s buildings policy or the resident’s individual cover extends to interior fittings such as kitchens and bathrooms. A Reinstatement Cost Assessment (RCA) can remove this uncertainty by ensuring that the report matches the buildings policy, stating where the operator’s responsibility ends and removing any coverage gaps. 

Valuations need to take into consideration tenant improvements, which are specific adaptations made by residents to improve their quality of life for their needs, again to ensure these are not uninsured. This includes lower kitchen worktops for wheelchair accessibility and ensuite wetrooms with guard rails. 

4. Communal areas 

Care homes are all-purpose settings. They are residences, medical facilities, and high-volume hospitality businesses all in one. So, the area set aside for common areas, and the reinstatement costs, can exceed that of standard residential housing. 

Reinstatement must account for the higher specification materials (such as floor and wall finishes) that come from a densely populated environment that is constantly in use. 

Corridors see traffic from people, wheelchairs, beds, and trolleys, so they usually require impact-resistant wall protection and wider doors to accommodate this. 

Similarly, flooring must be slip resistant and waterproof, especially in ensuites and communal activity areas. This is to withstand the frequent industrial cleaning that takes place and ensure residents don’t slip and injure themselves. Rebuilding with standard domestic finishes would not only fail to meet operational and durability needs, but may breach health and safety standards. 

Kitchens in care homes are often an underestimated asset, as they are in frequent, daily operation feeding a large volume of residents three meals a day, often to specific diets and nutritional needs. Reinstating this facility’s capacities requires a fully specified commercial catering environment. Industrial extraction fans, stainless steel preparation areas, and walk-in storage areas are a must for these kitchens. 

Up to date valuations must also reflect the higher needs and expectations of the care sector. Alongside standard communal contents like TVs and comfortable furniture, more luxury features in common areas, such as in-house cinemas, games rooms, coffee shops, and pools are becoming increasingly popular. These features require bespoke and high-specification fit-outs that must be included in reinstatement costs. 

Additionally, care homes must accommodate essential non-resident areas that must be covered. This includes medical treatment rooms, staff changing rooms and overnight accommodation facilities. All of which add to the complexity and cost of the total rebuild. 

5. Site logistics and external works

Finally, the reinstatement value of a care home is not limited to just the four walls of the building. The external features, including gardens and car parks, and physical constraints of the site can drive up costs. 

A comprehensive valuation must capture the external infrastructure required for day-to-day operations. This includes ambulance access points, car parks for both staff and visitors, and secure fencing around the home and gardens. Sensory gardens are a key aspect of modern care homes, often being designed for crucial dementia care. They are landscaped with specialist planting, safe pathways, and water features in mind, which can be costly to reinstate, but are essential for care patients.

Rebuilding a care facility requires a specialist team who understands all of its crucial facilities and the importance of high standards. Professional fees are typically higher due to the necessity of specialist healthcare architects, CQC consultants, and infection control engineers. This cohort of experts ensures the new design is compliant and up to safety standards. 

Market volatility also cannot be ignored. Post pandemic inflation has increased the cost of both materials and skilled labour across many construction projects.Relying on historic build costs without adjusting for inflationary rises in material prices and specialist rates required for the care sector is likely to leave operators dangerously underinsured. 

Securing the future of the care sector 

Ultimately, reinstating a care facility is about rebuilding a healthcare environment, not just a standard residential building. The combination of clinical infrastructure, regulatory enhancements, and complex asset demarcation makes valuation in the care sector uniquely challenging. 

The consequences of getting declared values wrong can at best be a delay in securing a settlement but at worst could mean the application of ‘Average’ where the insurers only meet a portion of the claim. This could be costly to owners and operators, and dismaying for vulnerable residents. 

We encourage care home owners and operators to review their current declared values to ensure their assets are not at risk from incorrect insurance coverage. A professional Reinstatement Cost Assessment ensures your coverage aligns with modern needs and regulations. 

In the care sector, accurate insurance is not just a financial safeguard, but a commitment to the continuity of quality care.