Rebuild Cost vs Market Value - How to get it right first time

Listed Under: Articles


When buying an insurance policy for your home, it’s vital that you insure it for the correct amount. With over a third of people basing their sum insured on purchase price, and 1 in 5 simply guessing, it can be difficult to pin a figure down. We’ve highlighted a few of the most common mistakes when it comes to valuing your property for insurance purposes.

Don’t insure for market value

A recent study undertaken by brokers has determined that over a third of people base their buildings sum insured on the property market value – the amount that the property would sell for – instead of the amount it would cost to rebuild from scratch. Market value is affected by external factors like desirability of location and, of course, the ever-fluctuating property market, and is likely to exceed the amount it would cost to rebuild.

Do consider all the variables

When calculating your sum insured, think about what it would cost to rebuild your home from the ground up. Things like:

  • The size of the building
  • The materials used to construct it – are any of them very expensive or rare?
  • Building regulations – is your property listed? If so, there may be obligations to reinstate it to it’s original condition, which could require specialist materials and workmanship.
  • Labour costs, including the size and estimated duration of the project.

Don’t willingly underinsure

Understanding the correlation between the amount to be insured and the premium quoted, you might be tempted to estimate values on the lower side to keep costs down. Whilst it may seem like you’re saving yourself a few hundred pounds, you could be setting yourself up for thousands of pounds of potential outlay if you needed to make a claim that your sum insured does not cover.

Do be wary of ‘Average’ clauses

To avoid scenarios like the one above, many insurance policies have an ‘Average Clause’ built in. This means that, if you needed to make a claim and were found to be underinsured, your insurer could reduce your pay-out in proportion to the amount you are underinsured by – which could leave you footing the bill for a significant sum.

Trust the experts

The best way to guarantee an accurate rebuilding cost is to have the property appraised by a professional. This can either be done in person or some surveyors can also offer desktop appraisals that don’t require anyone to visit.

Surveys should be done regularly (we recommend once every 5 years) to make sure your sum insured is always up to date. If you make any improvements to your property, adjust the rebuild to reflect them.

If you’d rather not pay for a survey, there are tools available online to help you calculate a rebuild value yourself. Whilst it isn’t as reliable as a professional opinion, it’s a good place to start and still better than plucking a figure out of the air.

The providers that we work with at Lumley Insurance appreciate that correctly valuing your home can be a difficult and costly process. Many of them have their own appraisal teams or access to independent surveyors and would be happy to offer a complimentary property valuation. Our insurers also won’t apply average. Meaning you can breathe easy knowing you’re properly covered.


If you’re unsure your home is insured for the right amount and you’d like more advice, talk to us on 01285 885885 or leave us a message using the form below – we’d be happy to help.