How do I calculate the rebuild value of my home?
The rebuild value of your home is generally less than the market value would be. This is because the rebuild value is the amount it would cost (including labour and materials) to build your home again. The market value, on the other hand, takes into account other factors. This includes the value of the land the property sits on, the desirability of the area and the state of the market at that particular time. This is likely to fluctuate far more than the actual rebuild value.
There are a number of ways that you can check what the rebuild cost of your home is:
Mortgage Valuation Report/Property Deeds
If you took out a mortgage when you purchased your house, it is likely that your mortgage valuation report will contain details of the rebuild value for the property. Equally, the deeds to your house may sometimes contain this information. Therefore, it is worth checking any documentation you own about the property as your first port of call.
Professional Rebuilding Cost Assessment from a registered surveyor
This is one of the most reliable methods of getting an accurate figure for your property’s rebuild cost. There is some cost involved with the average survey costing around £250. However, many people choose this option due to the increased security of having an accurate figure to work with. Local surveyors can be found via the RICS website which is an independent professional body.
Rebuild cost calculator from RICS
If you don’t want to employ the services of a professional, RICS has produced an online calculator to help estimate your property’s rebuild cost. This has been built into the CoverBuilder quote system, so you can produce an estimate in order to generate a quote. However, this service cannot be used for listed buildings and properties over a certain size.
Points to watch
It is important to be aware when it comes to property rebuild value that this can change over time. This figure can fluctuate along with builder and material costs. General inflation will also mean that your rebuild cost can end up being higher than it previously was. This means that even if you start with an accurate figure, it is advisable to check this every few years. You can then ensure that it is still correct.
You should also take into account that additions such as an extension can lead to an increase in the rebuild cost of a property. Every time you make any alterations it is wise to assess whether you think this figure is still accurate.
Why does the rebuild cost matter?
Being either underinsured or overinsured can bring negative consequences. It is particularly dangerous to be underinsured as your insurer will only pay out up to your insured value. This means that if something happens to your home it may cost more to rebuild it than you are covered for. You would then be left to foot the rest of the bill, which can run into the hundreds of thousands.
However, being over insured means that you will be paying more for your insurance each month than you actually need to. This creates a large unnecessary expenditure. Your insurer will only ever pay as much as it costs to build your home again. You will not receive the surplus money. This is why knowing how much it will cost to build your house all over again is so vitally important.