Q5. For a total loss of my flat, will compensation be based on the current market value, the cost to replace it, or the price I originally paid?

Q5. For a total loss of my flat, will compensation be based on the current market value, the cost to replace it, or the price I originally paid?

For a flat destroyed by fire, the practical answer usually depends on the type of claim. 

A civil damages claim focuses on the value of the property loss actually suffered and may, depending on the facts, be the value of damaged property, repair or reinstatement cost, and/or other measures as determined by the Court. In a total-loss situation, the court will generally look for a fair measure that compensates for the real loss without putting the claimant in a better position than before the fire. In everyday terms, that usually means the law is trying to put you back, so far as money can do it, into the position you would have been in if the wrong had not happened, rather than giving you a windfall based on an old purchase price or an inflated figure not tied to the actual loss. The available heads of claim and the exact amount depend on evidence of an individual case. 

In many cases, the original price may not be the right measure because it may be far above or far below the real loss at the relevant time. A flat bought many years ago may have risen greatly in value, or may have been bought at a subsidised price, so the historic price often says little about the current cost of rebuilding or the value of the property destroyed at the time of the fire.

For properties inside the flat, it would still be useful to gather receipts showing purchase prices of lost items, as proof of cost, age, condition, and replacement evidence will matter when valuing household contents and personal belongings. 

For an insurance claim, depending on the terms of the insurance policy or agreement, it may cover the reasonable cost of physically rebuilding or restoring the structure; alternatively, it may be on another basis, such as the land value or the flat’s open-market sale price. However, there may be other relevant terms, such as the sums insured, underinsurance, exclusions, and any building-wide arrangements. Depending on the terms, building or fire insurance via the Owners’ Corporation may cover structural damage such as walls, floors, ceilings, doors and windows, and those proceeds are used primarily for rebuilding.

Assessment of damage or loss and interpretation of the insurance policy may commonly require legal knowledge.  Therefore, victims should seek independent legal advice as soon as possible.