When getting a home insurance quote the amount of buildings cover you require is determined by the rebuild cost. That means you need to understand “how much to rebuild my house?”
It is NOT the market value of your house – people often confuse the two, and if you do you may end up paying more than necessary for your insurance as the market value is usually higher than the rebuild value.
The amount of buildings cover you require is how much it would cost to rebuild the property if it was completely destroyed and had to be rebuilt from scratch – and you need to think about whether there are particular features of your house, such as carvings or luxury materials, that will need to be taken into account. That goes for standard home insurance policies as well as non-standard and unoccupied home insurance.
Home insurers use this as a significant factor in their pricing model to calculate the premium you will pay and so it’s worth getting it right so you don’t overpay or underinsure.
Don’t under estimate your buildings cover to get a better premium as that will have serious consequences if you have to make a claim.
Why Rebuild Cost Matters
As mentioned above, people make the mistake of thinking their rebuild cost is the same as the market value of the property. This is incorrect as the market value includes the land the property is built on as well as market forces like postcode, schools, local economy and more.
In most cases the market value of the property is much higher than the rebuild cost. But if you use the market value as the buildings sum insured then you’ll probably end up paying a higher premium. Bear in mind that for certain remote properties, such as in the Scottish Isles, the rebuild value may be more than the market value, so make sure that you get the correct holiday home insurance.
Regardless of how much you insure for an insurer will only ever pay out up to the true rebuild value of the home (unless you under insure) and so there is no benefit to over-insuring. That’s because there’s a clear opportunity for fraud if people were able to overstate the value of a property and then burn it down and claim the higher figure.
Underinsuring also carries risk as any payout – even on individual smaller claims – will be calculated in proportion to the rebuild value you provide. So if you underinsure by 20% your insurer will likely only pay out 80% of any claim in respect of flood damage or subsidence, for instance.
How To Calculate Your Rebuild Cost
If you have recently bought your home with a mortgage then you could be in luck. Your mortgage valuation report should contain an up-to-date rebuild cost valuation of how much to rebuild your house.
However, you may need to have this reviewed regularly as rebuild costs can change.A good insurer- such as Emerald Life – will give you some help by increasing the cover levels annually by the rate of inflation, but it is always your responsibility to give the insurer the correct value.
There are two ways to calculate your rebuild cost:
- use the Building Cost Information Service’s house rebuilding cost calculator, or
- hire a chartered surveyor to carry out a professional valuation
The great thing about the rebuild cost calculator is that it is free and you can use it quickly online. However, it is not perfectly accurate as it doesn’t take into account things like unusual construction materials – that will be for you to consider.
When Do I Need A Chartered Surveyor?
If you want a higher level of accuracy, the house is of modern or specialist construction, is a listed property or you don’t have the rebuild valuation to hand (if you can’t lay your hands on the report from when you took your mortgage for example then another option is a chartered surveyor.
In general a chartered surveyor will usually be the most accurate way to find your buildings value. While this is the most accurate option there will be some cost, usually in the low hundreds of pounds.
A chartered surveyor will be necessary in some situations where even a rebuild cost calculator won’t be able to help.
Some of those are:
- Listed buildings
- Non-standard construction
- Non-standard features such as an underground swimming pool
- Special architectural features