Insurance Valuation Checklist | Replacement Cost

Written by: Sydney Property Valuation Editorial

Last updated: June 2026

Introduction

This checklist explains what an insurance (replacement cost) valuation involves and what to prepare before instructing one. It is written for property owners, strata managers, commercial landlords and insurance brokers who need to set an accurate sum insured and reduce the risk of underinsurance.

An insurance valuation assesses the cost to rebuild or reinstate a building, rather than its market (sale) value. The two figures are different: market value reflects what a buyer would pay for the land and building together, while replacement cost reflects what it would cost to reconstruct the building if it were destroyed. Setting the sum insured on the wrong basis is a common cause of underinsurance.

This is general information only and is not insurance or financial advice. An insurance broker or adviser should confirm the cover required for a specific property.

Who this checklist is for

Property owners insuring a house, commercial building or investment property
Strata managers and owners corporations arranging building insurance for a scheme
Commercial landlords insuring tenanted premises
Insurance brokers helping clients set an accurate sum insured

Why replacement cost matters

The sum insured should reflect the full cost to rebuild, not the property’s sale price. A replacement cost (or reinstatement) valuation typically considers:

Rebuilding costs for the specific construction type and finishes
Demolition and site clearing after a loss
Professional fees — architects, engineers, certifiers
Compliance upgrades to current building standards during reinstatement
Escalation — cost movements over the rebuild period
GST, where relevant

Underinsurance can leave an owner or owners corporation funding a shortfall after a major loss. In many strata schemes, obtaining a replacement-cost valuation at regular intervals is a legislative or governance requirement — in several states, at least every five years — so check the rules that apply in your state.

The insurance valuation checklist

Work through the categories below. Not every item applies to every matter — gather what is relevant.

Property and construction details

Full property address and title details
Building type — freestanding house, unit block, commercial or industrial
Construction materials (brick, timber, concrete, cladding type)
Approximate age of the building and any major renovations

Size and layout

Floor area / gross building area
Number of levels and any basement or car parking
Building plans, where available

Improvements and features

Fit-out, fixtures and finishes
Landscaping, fencing, pools, retaining walls and other external improvements
Solar, lifts, fire services and other building systems

Strata-specific items (where relevant)

Common property and shared structures
Prior strata insurance valuations
Owners corporation records and by-laws relevant to insurable items

Supporting documents

Current insurance policy and sum insured
Rates notices
Any prior insurance or replacement-cost valuations

Instruction details to include

When instructing an insurance valuation, confirm the following in writing so the scope is unambiguous:

The basis — replacement/reinstatement cost, not market value
Whether professional fees, demolition, escalation and GST are to be included
The date of valuation and the review interval
The intended users (owner, owners corporation, broker, insurer)

Common mistakes to avoid

Insuring for market value instead of rebuild cost: These are different figures and using the wrong one causes underinsurance.
Not updating the sum insured: Construction costs change; an old figure may no longer be adequate.
Ignoring compliance upgrades: Rebuilding to current standards can cost more than the original build.
Leaving out fees and demolition: These add materially to a reinstatement cost.
Overlooking external improvements: Fencing, pools and retaining walls are often forgotten.
Missing the strata review interval: Schemes may be required to revalue at set intervals.

Frequently asked questions

What’s the difference between market value and replacement cost? Market value is what a buyer would pay for the land and building together; replacement cost is what it would cost to rebuild the building after a loss. Insurance is based on replacement cost, not market value.
Why does underinsurance happen? Often because the sum insured is set on market value, or because an old figure isn’t updated as construction costs rise. A current replacement-cost valuation helps avoid a shortfall after a major loss.
Does a replacement cost figure include demolition and fees? It should, where relevant — demolition, professional fees, compliance upgrades, cost escalation and GST all add to a realistic reinstatement figure. Confirm what’s included when you instruct the valuation.
How often should a strata scheme revalue? Many schemes are required to obtain a replacement-cost valuation at set intervals — in several states, at least every five years. Check the rules that apply in your state and scheme.
Can one valuation cover the building and the contents or equipment? Building reinstatement and contents/equipment are usually assessed separately. For plant and equipment, our separate checklist covers what to prepare.
Is replacement cost the same as what I paid for the property? No. The purchase price includes land and reflects the market. Replacement cost is about rebuilding the structure, which can be higher or lower than the purchase price.

Professional use note

Insurance brokers and strata managers are welcome to share this checklist with clients and owners corporations as a general preparation resource. It helps them gather the right building information and understand why replacement cost differs from market value — supporting an accurate sum insured.

This checklist is general information and does not replace advice specific to the property or policy.

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