When taking out home insurance you will be asked to calculate your house rebuild costs. This will determine the level of cover you need from your buildings insurance.
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What is the rebuild cost of my house?
As the term suggests, the “rebuild cost” is the amount of money you would need to rebuild your home from scratch.
Rebuilding takes into consideration the price of labour and materials that would be involved in building a house identical to yours on the land you own.
The final sum is usually less than the market value of your home i.e. the amount you’d expect to get if you were selling it.
This is because your home's market value takes into account other factors, such as location, school catchment area and supply and demand.
Why do I need to know this?
You will need to know the rebuild cost of your home when you come to buy buildings insurance.
Having an accurate figure can help prevent you from over or underinsuring your house.
This is important because in the unfortunate event that your home requires a complete rebuild, you could be left to cover any difference in price.
Hire a surveyor
The best way to get an accurate rebuild cost is to get a surveyor to carry out detailed measurements of your house and then prepare a professional Rebuilding Cost Assessment.
This should set you back around £250 for a basic survey, and you can find a local surveyor through RICS (an independent professional body).
Use a rebuild cost calculator
Another option is to use a rebuild cost calculator from RICS.
Before you use the calculator you’ll need to know your home’s external floor area for both upstairs and downstairs (m2 or ft2): this will give you the rebuilding cost per square metre.
To get this, go outside and measure the length and width of the ground floor walls, then multiply these two figures together.
If the upstairs is identical to the downstairs, simply double the ground floor area.
If it’s different, calculate the upstairs area separately and add it to the downstairs result.
There are a number of restrictions to the BCIS calculator. For example, historic or listed buildings aren’t covered and neither are houses that aren't built of brick.
What about flats and maisonettes?
Construction methods are different for flats so, if you own a flat or maisonette, it’s best to let the surveyor do the work instead of using a calculator.
It’s worth noting that, as most flats are leasehold, a management company or building owner will probably already have buildings insurance in place, which will typically be paid for via service charges.
Updating your home’s rebuild cost
If you make any structural changes to your house, such as a new extension or a loft conversion, these are likely to affect the rebuild cost.
If the rebuild cost increases without your buildings insurance increasing to match, you could end up underinsured and left to cover the difference if anything was to happen.
Therefore it’s important to check that your buildings insurance covers anything that adds extra value to the rebuild cost of your home.
So before you start work on your next big project, it’s worth chatting to your insurer first.