Home Insurance

Help with Buildings Insurance

Our home insurance policy offers excellent protection against the disasters and misfortunes that may strike the fabric of your building.

Yet one thing any such insurance requires from you the policyholder is an estimation of the rebuilding cost as this is what will constitute your ‘insured value'.

The ‘rebuilding cost' for home insurance

This can sometimes cause confusion as it may be misinterpreted to mean ‘market value' or even what you paid for your home. These are usually three very different things.

The rebuilding cost is an estimation as to how much it would cost to completely rebuild your home from scratch should it be destroyed in a disaster of some form. The market value is the amount you may realistically expect to receive for your property if it was sold. What you bought it for is probably what you think it is worth.

The market value of the property may be higher or lower than the rebuilding costs depending upon a number of circumstances.

Special circumstances

If property in an area has undergone a catastrophic reduction in commercial value for any reason (e.g. local environmental concerns) then it may be possible that it would cost more to rebuild than it is worth on the market.

This may also happen if your home is an ancient and listed property in a conservation area. In such cases, local and national laws may demand that traditional materials and techniques are re-used to restore your property and its surroundings into their original condition. The costs of this may be exceptionally high and once again, this could result in the rebuilding costs being higher than the market value.

Alternatively, if you property is a recent brick-built construction, the rebuilding costs may be lower than it's theoretical market value.

Market forces, property types and locations will all affect the position here.

Avoiding guessing

Based on the above, if you specify the market value of your property as the ‘insured value' in your home insurance policy, you may be over or under insuring it and possibly paying an unnecessarily high premium. Remember that home insurance works to pay for the rebuilding costs in the event of a disaster - it does not pay you out the lump sum you've put in as ‘the insured value'.

Accurately assessing the rebuilding costs of a property is not usually a job for amateurs. It usually requires a trained and qualified surveyor.

This may sometimes be done as part of your original structural survey. It is worth remembering though to ensure that this initial value is index-linked in your insurance as the passage of time means that the rebuilding costs may become more expensive on a year-by-year basis and you'll probably want your insurance cover to reflect that.

Getting a ‘rough-cut' feel

The Association of British Insurers (ABI) together with the Royal Institution of Chartered Surveyors (RICS), have got together to produce an online guide to rebuilding costs.

This is available in the form of a calculator and you may find it extremely useful. You can access it through the link: http://abi.bcis.co.uk/ 

Our help

Getting the right level of home insurance depends upon having an accurate understanding of the costs involved in rebuilding your home. It's an important subject and we will gladly provide further help if you are unclear on any of the above principles.