What did I pay for it? Often, when insurers ask about the cost to rebuild your home, people think they mean its sale price or current market value. But that’s not true. What really matters for the home insurance quote is the cost to rebuild, which is quite different.
People often feel unsure about what they should include in their calculation and nervous that even a small mistake might lead to big issues. This guide will help you understand the main factors involved in estimating your home’s rebuild cost so it matches the amount on your policy1, helping you avoid having too little or too much insurance cover.
EASY AS HACK
Calculating a rebuild cost is essential to ensure you can afford to rebuild your home completely if a fire, flood or other disaster destroyed it.
At a glance
The key factors that can affect your rebuild cost:
- Professional fees like architects and surveyors
- Labour and materials
- Demolition and debris removal
- Fixtures, fittings and installations
- Planning and building regulation approval
- Outbuildings, driveways and boundary walls
What does rebuild cost mean?
A rebuild is only needed in serious situations, such as fire or flood. At the same time, it’s important not to simply assume it won’t happen. You might run into problems later if your home is insured for too much or too little.
If you own a home, especially with a mortgage, your buildings insurance will usually pay for the total cost2 to rebuild your house and permanent fittings from scratch if it’s completely destroyed3. This is called the ‘sum insured’.
The typical damage or loss covered by most policies include fire, flood, storm, being hit by a moving object such as a plane, or sinking ground (subsidence)3. In insurance, the rebuild cost is called the ‘reinstatement cost assessment'.4 It may differ from its market value – in fact, it’s usually less.5
The key is to make sure your rebuild calculations match the amounts in your policy. If you have an existing policy, take a moment to review it. Check what it covers and what it doesn’t, like driveways and swimming pools1 (insurers call these ‘exclusions’).
If you need help understanding this and other terms, head to our guide to insurance terms.
How do you calculate rebuild cost for insurance?
Unless you’re a quantity surveyor, you have probably never had to work out the rebuild cost of a house. Most of us have only seen rebuild costs on a mortgage valuation or property deeds – and that might have been a while ago.
Some policies set the rebuild cost for you, often based on standard calculations. If your policy includes this, you won’t need to provide your own rebuild estimate — though it’s still worth checking the cover meets your needs.5
Once you understand about the cost to rebuild your home from scratch, rather than its market value, there are different methods to calculate your rebuild cost.
- Use the Building Costs Information Service (BCIS) calculator from the Association of British Insurers (ABI). It’s simple to use and free to register.
- Get a chartered surveyor to do an assessment. The Royal Institution of Chartered Surveyors (RICS) is a good place to start, especially if your property is unusual, built before 1720, or listed.1 You can’t use BCIS for these types of properties.
The online calculator will ask for:
- Property type (purpose-built flat, converted flat, house, bungalow)
- Number of floors/storeys
- Your property’s postcode
- Its age band
- Whether it has a cellar or basement
- Number of bedrooms and bathrooms
- Wall and roof types
- Garage spaces (one, two or more)
- Floor area/square footage6
It will then work out the estimated cost to rebuild and give you a PDF which can be used to inform your insurer.
What factors affect the rebuild cost?
Many people can easily identify some of the clear factors involved in rebuilding, like the cost of bricks, roof tiles, and the labour required to put it all together. But it’s helpful to be aware of other less well-known aspects. These include professional fees and building regulations.
The following construction elements can significantly affect the total cost of a rebuild:
- Professional/consultant fees – architect, structural engineer, project manager7
- Labour and materials
- Demolition and debris removal1
- Construction – brickwork, stud walls, roofs, joinery, finishes and built-in wardrobes and kitchen/bathroom cupboards1
- Installations – water, electrical, plumbing, heating, cables, and drains4
Other aspects affecting costs include:
- A property’s quality and facilities. A basic house will cost more than rebuilding a high-quality home with above-average features.3
- Size/number of extensions – the bigger the property, the more it costs to rebuild.
- Number of fixtures and fittings.5
- Historic or listed buildings7 – usually cost more to rebuild than typical homes because their special features need specialist workers. To find out if your property is a listed building, search Historic England, Cof Cymru or Historic Environment Scotland. If you live in Northern Ireland, you’ll need the Department of Communities.
- Special features, such as swimming pools, may need to be measured separately.8
- Current planning and building regulations. The government says that building regulations approval is needed for all construction work.9 Therefore, a rebuild must meet them, too, even if they differ from the standards when the building was built.
Why is the rebuild estimate so important?
If the rebuild estimate is wrong, it can cause serious financial problems. This can feel very stressful during an already difficult time when you’re facing a disaster like a fire or flood and might have to stay in temporary housing for months.
Unfortunately, it’s often only when people come to claim that they realise they’re underinsured. Then, it’s too late to go back and fix it. The risk is greater when you’re underinsured3 than overinsured, but accuracy matters either way.
- Overinsurance means you could be spending more money than needed on insurance that suits your needs. Some people think they will automatically get a bigger payment if they pay more than needed, but that’s not the case.10
- Underinsurance means you might pay less for the cover you need but the insured amount won’t be enough to match the actual cost of rebuilding.11
Also, if your insurance is too low, most policies have a ‘average clause’ that allows your insurer to reduce the claim payment by that same percentage.
The Financial Ombudsman Service gives a good example – a homeowner estimated his rebuilding cost was £400,000 based on his neighbour’s recent purchase price. But the actual cost was double (£800,000). Because of the policy’s average clause, the insurer agreed to pay only half of the claim11 not the full amount.
When should you update the rebuild cost of your home?
Updating your rebuild cost is important to ensure your building insurance policy keeps up and you have the correct amount covered. Many organisations, including the ABI, note that this is typically done as part of the annual renewal process3 or after any building work, such as adding an extension or converting the loft.5
Surveyors and insurers suggest updating your cover each year because rebuilding costs, including redesign and reconstruction, can go up due to inflation.7
How do I calculate my rebuild cost if I live in a flat?
If you live in a leasehold flat, your buildings insurance might be included in the service charge you pay, so you don’t need to work it out yourself.
Always review your building documents, especially the lease agreement, before getting a new insurance policy. Your lease will also say if you need to have contents insurance,5 which protects the things inside, including your possessions. Learn more about buildings and contents insurance.
If you rent the property, your landlord usually buys insurance to cover rebuilding costs and will include the insurance company’s name in your lease. The property owner or freeholder (usually the landlord)12 may also charge you for the buildings insurance they’ve arranged.5
You can use free online calculators to work out the rebuilding costs. Remember that if you’re a joint freeholder in a block, you need to find out what areas or issues are covered jointly13, such as gardens, empty flats or what happens if someone gets hurt while visiting.
Why is the rebuild cost different to the market value of my home?
Rebuilding a house usually costs less than its market price because the cost estimates don’t include factors like location, land, age or condition – which affect the property’s value.14
Rebuild costs are typically based on construction, so similar properties may have similar rebuild estimates even if their market values differ.
Find out why home insurance is easy with Ageas.
FAQs
Is it important to know the rebuild cost of my home?
It’s important to know the rebuild cost of your home and get it right, so your insurance company knows how much to insure it for in case it’s damaged beyond repair.
Why is the rebuild cost different from the market value?
The rebuild cost is often different to the market value, which is based on factors such as location, land and the quality of the property. In contrast, the rebuild cost is the probable cost of reconstructing your home alongside professional fees, demolition and so on.
What’s the difference between the rebuild cost and market value of my home?
The rebuild cost is typically less than your home’s market value because it’s based on the property’s declared value on the day after its destruction and is on a new for old basis.7
Rebuild costs can be higher if you own a listed or period property because heritage organisations may be involved and the works are more complex.
What does a home rebuild cost include?
A home rebuild cost includes:
- Demolition and clearance costs
- Professional fees, such as surveyors
- Materials and labour
- Construction and installation
- Statutory fees
Sources
[1] https://abi.bcis.co.uk/checking-sum-insured
[2] https://www.ageas.co.uk/solved/understanding-insurance/the-a-z-of-home-insurance/
[4] https://cila.co.uk/document/an-insight-into-insurance-rebuilding-costs/
[5] https://www.citizensadvice.org.uk/consumer/insurance/types-of-insurance/buildings-insurance/
[6] https://abi.bcis.co.uk/calculator
[8] https://abi.bcis.co.uk/measuring-your-home
[9] https://www.gov.uk/building-regulations-approval
[10] https://www.abi.org.uk/data-and-resources/tools-and-resources/how-insurance-works/
[12] https://www.lease-advice.org/leasehold/basics/leasehold/freeholders/
[13] https://hoa.org.uk/advice/guides-for-homeowners/for-owners/how-do-i-insure-a-flat/
[14] https://hoa.org.uk/advice/guides-for-homeowners/i-am-selling/estate-agent-valuations/
