How to accurately estimate your home’s rebuild cost

With 76% of UK properties reportedly underinsured, we look at why the rebuild cost is so important, how to accurately calculate it, and why underinsuring your home can lead to serious financial repercussions.  

Why your home’s rebuild cost is so important 

Rebuild cost is the amount of money it would take to rebuild your home from scratch if it were destroyed. As drastic as it sounds, it’s a vital figure that takes into account all the associated costs to rebuild your home. This includes clearing the site as well as labour, materials, and fees for professionals.    

Your building insurance policy will use the rebuild cost as the basis of the sum insured – the total amount of money your insurer will pay out in a claim if your property needs to be completely rebuilt.  

Understanding the difference: rebuild cost vs. market value 

Rebuild cost is not the same as your home’s market value, which is the price you’d sell your home for. Your home’s market value can be higher or lower than its rebuild value – often older or listed properties will have a higher rebuild value compared to market value, while a new build property will often have a lower rebuild value than its market value. The two values are very different, so when it comes to your insurance policy, they cannot be used interchangeably.  

How to calculate your home’s rebuild cost 

You can work out your home’s rebuild cost in a number of ways. What’s suitable will depend on the type of property, its age, and how many bedrooms it has.  

Please note, setting a realistic rebuild cost is the responsibility of the policyholder - your insurance broker or insurer cannot determine this for you.

Using the BCIS rebuild cost calculator

The Building Cost Information Service (BCIS) provides a widely used online calculator recommended by the Association of British Insurers (ABI). You’ll need to register to use the service, but it’s otherwise free. 

Once you’ve registered, you’ll be asked several questions about your home, for example: 

• The type of home it is (detached, semi-detached, terraced). 

• How many storeys there are or if it’s a bungalow. 

• Your postcode. 

• When your home was built (approximately). 

• External floor area, number of bedrooms, and bathrooms. 

• Whether your home has a garage (and its size). 

• The external wall type (brick or stone). 

• The type of roof your home has (tile, slate, flat, or thatch). 

The BCIS calculator is best used for ‘standard homes’ which are built from conventional materials like brick, stone, tile or slate.  

Getting a desktop survey 

A desktop survey is conducted by a surveyor remotely, using available data such as property records, maps, rebuild cost data, and the information you provide, to determine the rebuild value.  

These types of valuations are suited for single properties with a rebuild value of up to £3million and can also cater for listed buildings.  

Hiring a chartered surveyor 

A chartered surveyor can provide you with a formal cost assessment based on the specific materials your home is made from, as well as any architectural features.  

Hiring a surveyor comes at a cost, but can be beneficial if your home is considered ‘non-standard’ (made from unconventional materials). This includes buildings made from timber, cob, thatch, steel, or concrete.  

A chartered surveyor may also be worth considering if your home: 

• is a listed building; 

• has any special architectural features; 

• is very large or has been significantly extended; 

• has been significantly modified. 

What factors influence the rebuild cost? 

Rebuild cost is affected by multiple factors; considerations include: 

• The size and footprint of your home. 

• The type of building and the materials used. 

• Whether your home has any special features, such as gables or patterned brickwork. 

• Professional fees for architects, surveyors, and engineers. 

• Costs for demolition and site clearance. 

• Your location in the UK (as this can affect labour costs). 

Why underinsuring your home is a serious risk 

Underinsurance occurs when the sum insured on your policy isn’t enough to cover the cost of replacing, repairing, or rebuilding your property or its contents.  

Underinsuring your home can be made even worse, as insurers may apply the ‘average clause’ if you make a claim for a partial loss. This means your insurer can reduce your payout by the amount you’re underinsured by.  

For example, if your home’s rebuild cost is £200,000 but it’s insured for £100,000, you’re underinsured by 50%. Using the average clause, if you made a claim for a partial loss (such as a rebuild of part of the property or a repair), your insurer could also reduce your payout by 50%. If you made a claim for a full rebuild, you would receive the sum insured (£100,000), leaving you £100,000 short of the rebuild value. It would then be down to you to make up any shortfall.  

The opposite of underinsurance is overinsurance (where the sum insured is more than the cost of repairing or replacing the items covered). This might feel like a good safety net to have, but it actually means you end up paying more for your policy than you need to. This can also occur due to inaccurately assessing the rebuild value or using the market value for your sum insured.  

Many home insurance policies have a blanket sum insured, for example, cover up to £500,000 or £1million, to protect homeowners from inaccuracies in calculating the rebuild cost.  

Tailored home insurance from Alan Boswell Group  

Cost is undoubtedly an important factor when it comes to home insurance. However, while cheaper policies may save you money in the short term, they may have limitations and fail to provide the cover you actually need. 

When you compare policies, double-check any exclusions so that you’re clear about what is and isn’t covered by your policy. Also, remember that if you make any major changes to your home, you’ll need to let your insurer know so they can update your policy if necessary. 

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