Calculating home rebuild costs

When you take out a home insurance policy, some insurers will require you to outline the rebuild cost for your property. This value is different from the market value of your home or the price you originally paid for it. Calculating the correct rebuild cost ensures you receive sufficient cover in your agreement without overpaying in premiums.

In this article, we’ll outline why rebuild costs for insurance are used, how they’re calculated and the importance of keeping your figure up to date. Read on to find out more.

What is my house rebuild cost?

A rebuild cost is an amount you’d need to recreate your home from scratch if it was destroyed or damaged beyond repair in an insurable incident, such as fire or severe weather. It doesn’t include the value of the land your property is built on, as it's purely about recreating a like-for-like replacement on your plot, should your property be lost.

Insurers use rebuild costs to work out your premiums and potential payouts, while also ensuring they’re fair and fitting. Let’s explore the differences between rebuild costs and other valuations in more detail to outline why they’re used.

Rebuild cost vs. the price you paid for your property

Imagine you paid £180,000 for your property over 10 years ago and have since renovated it with an extension. Today, it might cost £250,000 to replace it based on current labour and material charges. If you insured your property at the original price, you would be underinsured by £70,000 and wouldn’t be able to rebuild your home for the original cost.

Rebuild cost vs. the current market value

If your house is worth £250,000 in today’s market but it would only cost you £150,000 to rebuild, insuring it at the market value would leave you paying premiums for an extra £100,000 of cover. 

On the other hand, your home might be built from specialist materials or features that would involve more intricate or skilled work to recreate. In that case, the rebuild cost might be higher than the market value and you’d have an insurance shortfall.

What does a home rebuild cost include?

The easiest way to work out your rebuild cost is to ask yourself:  ‘How much would it cost to rebuild my house from scratch’? There are several factors that can go into this calculation, but it will most likely include the below:

• Demolition and clearance costs (for the existing, damaged property and site)
• Professional fees (for architects, surveyors, local councils etc.)
• Materials
• Labour

How can I calculate my property’s rebuild cost?

If you live in a property that’s listed, built using special materials (not brick) or has certain architectural features such as a thatched roof, it’s best to hire a professional chartered surveyor to conduct a dedicated assessment of your property. Prices can start from £250 but will vary depending on your location, type of property, and scale of the survey. This approach will allow you to accurately cost your home’s unique build.

If your property is a standard, brick-built building, there are calculators available to use online. These tools are often free, but you may have to register to use them. You’ll also need to know the following details for your home:

• Estimated total floor space in square metres (the length x width of each floor added up together)
• Type (terraced, detached etc.)
• Number of rooms
• Structural information (roof and wall types)

You may also find your home’s rebuild cost amount quoted in your:

• Deeds
• Mortgage valuation
• Surveyors report from the purchase
• Insurance renewal policy documents

However, if these documents are not recent, they may well be out of date and inaccurate due to the modern costs of labour and materials or any changes you’ve made. As such, it could be worth recalculating.

What else do I need to know about home rebuild costs?

Any renovations to the house (such as extensions, loft conversions or changes to the structure) will likely increase your rebuild cost. It’s vital that you keep your insurer informed of such changes to ensure you get the cover your property requires.

The government’s fire and rescue incident statistics report stated that, in England, over 26,000 dwellings were damaged by fires between June 2022 and June 2023. There are also millions of homes that are in flood-risk locations. If you were one of the people whose home was affected by such an unfortunate incident, you’d want your rebuild cost to reflect all the improvements you’d made to your home. Otherwise, you could lose them. The only way to do this is by informing your provider every time you make a major, structural update that affects the number of rooms, and floor space.

Getting your home insurance details correct is key to getting the right policy and protection for your circumstances.