How Do You Work Out Rebuild Costs for Insurance?

Ensuring your home is properly insured is crucial, and one of the most important tools in determining the correct coverage is an accurate estimate of the rebuild cost. But how do you work out rebuild costs for insurance? Understanding this figure will help you combat the risk of being underinsured, which in the worst case scenario, can leave you financially vulnerable in the event of a disaster. This article explains how rebuilding costs are calculated, what factors influence them, and how professional tools such as desktop valuations can provide the most accurate results.

What Is The Rebuild Cost for Insurance?

The rebuild cost, in basic terms, is the estimated cost required to completely reconstruct your home if it were destroyed by any disaster e.g. fire, flood, landslide. Unlike market value, which considers location, demand, and land value, the rebuild cost strictly refers to the expenses of demolishing the existing structure and rebuilding it to its original specifications.

Why Is the Rebuild Cost Important?

An accurate estimate of the rebuild cost is very important to protect your home against being incorrectly insured. Now, this can be one of two ways: you could be underinsured - which means in the event of a disaster you could be required to cover the financial shortfall to rebuild your home. A simple example of this could be: your home has been insured for £200,000, however the correct rebuild cost is £240,000. That would leave you £40,000 short if the worst should happen. Or on the other hand, you could be over insured - which means you might be over paying on your insurance premiums unnecessarily. 

Factors That Influence Rebuild Costs for Insurance

Several factors determine the rebuild cost of a property, these are a few of the most common:

Property Size and Type

The larger and more complex your home is, the higher the rebuild cost. Bungalows, townhouses, and detached homes all have different rebuild values.

Construction Materials

The materials used in your home affect costs significantly. A house made from high-quality stone or brick will cost more to rebuild than one made from timber or prefabricated materials.

Labour Costs

Labour rates vary depending on your location. Urban areas typically have higher construction labour costs than rural areas. Or if you live in a location that is difficult to access, this might be higher too.

Special Features

Bespoke features such as underfloor heating, custom-built kitchens, or heritage architecture increase rebuilding expenses.

Demolition and Site Clearance

Before rebuilding begins, the site may need to be cleared. The cost of demolishing the remains of a damaged structure is included in the rebuild cost estimate.

How to Calculate Rebuilding Costs for Insurance

There are different ways to estimate your home's rebuild cost, with varying levels of accuracy. These range from less accurate free options, all the way to in depth on-site surveys.

Use a Rebuild Cost Calculator

Online rebuild cost calculators provide a quick estimate based on general property details. These tools are useful for standard properties and provide a guideline figure but may not account for all unique features/factors or regional cost variations.

On Site Survey

A professional surveyor can carry out a detailed on site property assessment and provide a highly accurate rebuild cost estimate. However, this is a costly option and can be a longer process. This can be useful for unique or non-standard properties.

Desktop Valuation

A desktop valuation is an efficient way to obtain an accurate rebuild cost estimate. This is what we specialise in at Don’t Guess. Our method uses a combination of open source data, satellite imagery and a comprehensive cost data library. Desktop valuations provide a precise estimate without requiring a physical site visit and are lower in price. You can learn more about our desktop valuations here.

Conclusion

Working out the correct rebuilding costs for insurance is essential to ensure your home is fully protected. An additional point to finish things up with is how often you should get a new rebuild cost estimate: typically, we recommend getting a new estimate either every 12 months, or when you have made significant changes to your property (an extension or a new bathroom etc.) to ensure your coverage is up to date. Hopefully we have shed some light on how the costs are calculated and given you some options available to assist you. As always if you have any questions, feel free to reach out to us.