FINANCE
authority approval of plans and the evaluation and awarding of the contract . The second stage ( reinstatement stage ) is the actual reconstruction period during which Contract Price Adjustment Provisions ( CPAP ) normally apply .
ESCALATION UNTIL THE END OF REINSTATEMENT
If the fixed improvements are valued only at the commencement of the insurance period , by the time the end of that period arrives the fixed improvements would be underinsured due to escalating building costs . It is , therefore , vital that the insured value makes provision for building market escalation during the period of insurance . It is considered good practice to describe the assumptions in terms of the various stages in the programme for reinstatement and the
documentation provisions . These stages will include the period from the date of loss to settlement / payment ; the pre-contract period ( from settlement date to contract commencement ) and the building contract period ( from contract commencement to completion )
This implies that the building inflation allowance during the insurance period and the building escalation allowance during the reinstatement period ( both pre-contact and postcontract ) make up the total sum insured . Often the terms inflation and escalation are used interchangeably to describe these increased costs . Therefore , it should be noted that inflation / escalation extends the policy to include cover during the course of the insurance period to avoid under insurance and to also include cover for the reinstatement thereafter .
106 SEPTEMBER 2022 SA Real Estate Investor Magazine