How to calculate rebuilding costs for home insurance

How to calculate rebuilding costs for home insurance? How much does home insurance cost? What’s the difference between buildings and contents? Why you need to know how much it costs to rebuild your home  Continue reading below as we answer every question below.

The rebuild cost is the amount it would cost to completely rebuild your home if it was destroyed beyond repair. It includes the price of labor and materials. This cost is usually lower than your home’s sale price or market value. Basing your policy on your home’s rebuild cost will prevent you from over-insuring and paying higher premiums than necessary.

If your home is made of non-standard materials (not brick-built) or has specialist architectural features, its rebuild cost may be higher than its market value. In this case, insure your home against the higher rebuild cost not the lower sale price or market value to avoid any insurance shortfalls.

How to calculate rebuilding costs for home insurance

If you own a standard, brick-built home there are two ways to calculate your rebuild cost:

If your home is made from non-standard materials, has special architectural features, or if you live in a listed building contact a chartered surveyor for advice.

To find out if you live in a listed building go to the relevant website for your country:

To find a chartered surveyor go to the Royal Institution of Chartered Surveyors website.

If you have recently bought your home the rebuild cost will be on your mortgage valuation or deeds.

Your rebuild cost should include any professional fees associated with rebuilding and the cost of clearing the site. 

Next steps  

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How much does home insurance cost?

The average cost of homeowners insurance has risen by more than 47% over the past 10 years, with the nationwide average standing at $1,445 in 2020. Your rates may be significantly different than the national number depending on many factors, like your location, your home’s building material and the amount of property you’re insuring.

Comparing homeowners insurance rates in three very different states offers an glimpse of how these factors can work.

StateAvg Annual Policy
New York$974

A home’s risk of damage directly affects the cost to insure it. Greater risk leads to more insurance claims, which in turn drives rates higher. Texas and Florida’s exposure to frequent, powerful storms make these states more expensive markets for home insurance. New York sees lower rates, partly thanks to its lower exposure to damaging wind events

What’s the difference between buildings and contents?

It’s important that property owners understand what buildings insurance actually covers, as there’s a lot of confusion between buildings and contents. This confusion can lead to claims disputes and holiday homes being under insured.

Buildings insurance covers the structure of the building – walls, windows, the roof, plus permanent ‘fixtures and fittings’ such as bathroom suites, toilets, fitted kitchens and wardrobes. The definition of buildings usually includes domestic outbuildings, garages, fixed fuel oil tanks, garden sheds, swimming pools, tennis courts, drives, patios, terraces, walls, gates and fences.

As a rule – can it reasonably be removed and taken to another home if you move? If it can, then it is ‘contents’ and it will not generally be covered by buildings insurance.

But what about laminate wooden flooring where the individual planks are glued together and fixed under a skirting board or beading? It’s a ‘fixture and fitting’ and part of the building.

What does buildings insurance cover?

Buildings insurance covers the cost of rebuilding or repairing damage to your holiday home (other than that arising through wear and tear) for ‘specified perils’.

These usually include fire, flood, subsidence, earthquake, storm, lightning, theft (or attempted theft) vandalism, escape of water, oil and damage caused by falling trees.

Is buildings insurance compulsory? If you have a mortgage on your property the lender will insist you take out buildings insurance. Otherwise, buildings insurance is not compulsory, but being uninsured is a huge risk.

Why you need to know how much it costs to rebuild your home

When you apply for insurance the insurer will require a buildings sum insured to calculate the premium.

A common mistake is that people use the purchase price or the current market value as the basis of the sum insured. This is wrong!

The buildings sum insured should represent the total cost of reinstating your holiday home – including demolition, debris removal, professional fees (architects, surveyors, engineers, legal) and the additional cost of complying with government or local authority requirements.

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