The Challenges of Assessing Heritage Properties for Insurance

Heritage properties, with their historical significance and architectural beauty, are an important part of our shared cultural legacy. Across the UK, there are roughly 500,000 listed buildings and monuments, each protected due to their cultural, architectural, or historical importance. (In England alone, this figure sits at over 370,000.) But while these properties carry historical value, they also pose unique challenges when it comes to insurance assessments. 

Unlike modern buildings, heritage properties require a more nuanced approach for both valuation and risk management. Here, we’ll explore the challenges of assessing heritage properties for insurance, addressing why standard insurance methods fall short and outlining the key considerations involved in obtaining accurate valuations and coverage for these irreplaceable buildings.

Why standard insurance methods are insufficient for heritage properties

The process of insuring historic or listed buildings may resemble standard property insurance valuations at first glance. However, there are several critical differences that make these properties more challenging to assess. 

1. Legal and regulatory requirements – listed building status and consent

What does listed building status mean?

Heritage properties are frequently ‘listed’, meaning they have been placed on a statutory list due to their special architectural or historical significance. 

Listed status places legal obligations on the property owner regarding any alterations, repairs, or reconstructions. For example, listed building consent is required for any changes to the structure that could affect its character. Listing may cover both the exterior and the interior, and any object or structure fixed to the building. Listing also applies to buildings or structures not physically attached but which are part of the property.

This is overseen by the local planning authority, which may also consult central government agencies or national heritage bodies. Importantly, listed buildings may not be demolished, extended, or significantly altered without prior permission.

How are listed buildings graded?

In England and Wales, listed buildings are categorised in three grades:

• Grade I – Buildings of exceptional interest and merit, and of national interest. Only 2% of listed buildings are classified on this level.
• Grade II* – Particularly important buildings of more than special interest, and of more than regional interest. This accounts for roughly 4% of all listed buildings.
• Grade II – Buildings of special interest, and of special regional interest. This covers the remaining 94% of all listed buildings and is the most likely grade of listing.

In Scotland, listed buildings are categorised into three groups based on their importance:

• Category A – Buildings with national or international significance. These are outstanding examples of a particular period, style, or building type.
• Category B – Buildings with regional or more than local importance. These are major examples of a particular period, style, or building type.
• Category C – Buildings with local importance. These are representative examples of a period, style, or building type. 

It is important to note that their assessment criteria may also differ slightly.

This creates further complications for insurance, as any reinstatement work must align with legal and regulatory standards. Insurance assessments for heritage properties must take these regulations into account, ensuring that sufficient coverage is in place to meet legal requirements, especially in the event of major damage.

The impact of legislation on insurance costs

Due to the need for regulatory compliance, the costs involved in rebuilding or repairing a listed building can significantly exceed those of a modern property. 

As well as legal or planning obligations to use traditional methods and materials, adding both time and expense to any work, professional fees for architects, historic building consultants, planning consultants, and project managers who specialise in heritage properties are higher, contributing to inflated reinstatement costs.

As such, heritage property owners need their insurance coverage to reflect these potential reinstatement costs.

2. Rebuilding and reinstatement complexities

Standard property cost assessments focus on modern rebuild costs in the event of damage or destruction. These estimates are generally based on current construction methods, materials, and labour costs, such as those provided by the Building Cost Information Service (BCIS). However, these rates do not meet the reality of the costs of reinstating heritage buildings and structures. As a result, using standard rebuild rates can expose listed property owners to significant underinsurance, leaving them unprotected in case of loss.

For example, the BCIS state themselves that their residential rebuild cost rates do not apply to:

• Houses built of stone
• Houses with more than three storeys
• House of a size greater than those given in the tables (approx. 320 square metres)
• Listed or historic buildings which will have to be built to their original design using identical material’

In practice, in the event of a loss, owners may have to rebuild the property in materials of like kind and quality, or as required by the Conservation Officer or English Heritage. 

3. Specialist materials and craftsmanship

One of the major challenges in insuring heritage properties is the requirement to use original materials during reinstatement. Heritage bodies and local authorities often insist that repairs are carried out using the same types of materials and methods as the original construction, meaning that traditional craftsmanship may be required to restore a property to its previous state. These materials and skills can be rare, difficult to source, and expensive, often requiring bespoke (and costly) solutions.

In some cases, a quarry may even need to be reopened to source the exact stone originally used for the building. Plus, certain architectural features, such as sculptures or bespoke wood carvings, may be impossible to replace outright. Instead, they may need to be carefully reproduced by specialist artisans, a process that can be both time-consuming and costly.

4. Demolition and debris removal

In the event of an insured incident, the costs of demolition and debris removal may be considerably more for a listed building than for standard buildings. 

When damage occurs, heritage bodies may place restrictions on how debris is handled. This can include requirements for storing, cataloguing, and potentially reusing materials, which adds significant costs and complexity to what might otherwise be a straightforward demolition.

Often listed buildings are in conservation areas or close to adjoining heritage assets. In these cases, any demolition work must ensure that adjacent properties are protected, both during and after the demolition. This may require additional safety measures, such as shoring up structures or erecting protective scaffolding, all of which comes at a cost.

5. Rebuild periods and delays

The timeline for rebuilding or repairing a heritage property is typically much longer than that of a modern building. This is due in part to the various legal and regulatory hurdles that must be cleared before work can begin, including obtaining listed building consent and ensuring compliance with building regulations. Additionally, the specialised materials and skilled labour required for the project may not be readily available, leading to further delays.

For some properties, an archaeological excavation may be necessary before any repairs can be carried out. This involves documenting and preserving any historical artefacts or features uncovered during the restoration process, adding both time and cost to the project. 

How do you assess the insurable value of a listed building?

Accurately assessing the insurable value of a heritage property requires specialised knowledge and expertise. A standard approach to property valuation will almost certainly result in underinsurance, as it cannot account for the unique complexities of these heritage properties.

Valuation based on total loss scenarios

Most heritage property valuations are prepared based on a total loss scenario, which assumes that the entire property is destroyed, and reinstatement is required from scratch. This is the most practical approach, as it is impossible to predict the exact nature or extent of any damage that might occur.

A qualified insurance valuer with expertise in heritage properties will carefully review the building’s listing details, ensuring that any reinstatement aligns with the required standards. This involves factoring in the costs of sourcing original materials, the need for skilled artisans, and the elevated professional fees associated with heritage properties.

Valuers will also consider the costs associated with adhering to modern building regulations, even though heritage properties are often exempt from certain standards. For instance, an assessor might need to account for installing additional fire safety measures or ensuring compliance with energy efficiency requirements, all while preserving the historical integrity of the building.

The importance of specialist insurance valuers

Heritage properties require more than just a standard insurance policy—they require a tailored approach informed by expert knowledge. Professional insurance valuers with experience in heritage properties understand the unique challenges involved and can provide accurate valuations that reflect the full extent of the costs associated with rebuilding or restoring a listed building.

By conducting thorough assessments that account for specialist materials, traditional craftsmanship, and compliance with heritage regulations, a qualified valuer can help ensure that the property is adequately protected. This not only safeguards the owner’s financial interests but also helps preserve the property’s historical and cultural significance for future generations.

In conclusion…

Heritage properties offer an invaluable connection to the past, but insuring them presents challenges that are far more complex than those associated with modern buildings. Owners of listed buildings must navigate a maze of legal, regulatory, and logistical challenges, all of which contribute to higher costs for reinstatement, demolition, and even debris removal.

It is critical for owners, trustees, and insurers to engage with specialists who understand these challenges. Accurate valuations and comprehensive insurance coverage are the keys to ensuring that these iconic properties are protected against loss, without leaving their owners exposed to significant financial risk. 

Get in touch to find out how Charterfields can provide tailored building consultancy and advice backed by proven experience working with these historic assets.