Ask many homeowners what their home is worth ‘for insurance purposes’ and you’ll get some fairly confused answers.
We often see customers giving the market value of their home, when asked how much their home should be insured for, rather than the ‘rebuild’ cost. However, the difference between the two can be tens of thousands of pounds! Here’s why.
Market value versus rebuild value
If your home were to burn to the ground, or be completely destroyed in some other way, how much would it cost to rebuild it? The correct answer isn’t how much someone would pay you for it if you were to put it on Rightmove!
If that were the case, a small studio flat on a posh street next to Harrods would cost more to ‘rebuild’ than a large house in the middle of Wales.
Completely rebuilding from scratch
The rebuild cost is how much it would take to completely rebuild the property from scratch.
The sum shouldn’t just include the building costs themselves, but also other factors, such as clearing the site, all materials and professional fees for architects, surveyors and local councils.
And you don’t need to take into consideration the value of the land the property stands on as this won’t need to be ‘rebuilt’.
Rebuild example costs
To give an example; a 3 bedroom Victorian terraced house in a commuter town around London might cost in the region of £250,000 to rebuild. However, depending on the town of course, it could be worth double that in terms of market value, or even more.
However, in places where house prices and building costs are much lower, such as parts of Scotland and the North, the rebuild value might be £200,000, which could actually exceed the market value by quite possibly £50,000.
Why is getting the rebuild value right important?
Many home insurance policies have a blanket maximum claim limit for rebuilding a home of £1million, which would cover the necessary work to start from scratch when building most properties.
However, not all do, and if you get it wrong, you might not be able to claim the full amount for the rebuild and potentially be unable to afford to make up the difference; a scary thought for most people.
How do you find out what your rebuild costs are?
If you’ve had a homebuyer’s survey done recently, the rebuild cost for your property will be listed there. TheBuilding Cost Information Service (BCIS) offers a rebuild cost calculator that will allow you to insure your house with an accurate estimate.
Our customers are at the heart of everything we do, so we have a team of experts with a real passion for making sure people get the cover that’s right for them. For more information, you can call our experts on 0330 0600 600 or visit www.policyexpert.co.uk/contact for more ways to reach us.
Published 23 November 2017