Is Your Property Insured for the Right Rebuild Cost?

September 21, 2026
Cicely Fry

Is Your Property Insured for the Right Rebuild Cost?

Do you know how much it would actually cost to rebuild your property?

Recent data from RebuildCostASSESSMENT found that only 8% of the properties it assessed had the right amount of insurance. Of the remaining properties, 67% were underinsured and 25% were overinsured.

This isn’t only a concern for businesses or owners of unusual properties. Whether you’re insuring your home, a high value property, a listed building or commercial premises, an inaccurate rebuild cost could mean your buildings insurance doesn’t reflect what it could actually cost to rebuild.

Your property’s rebuild cost isn’t the same as its market value, and the figure can change over time. So, how do you know if yours is right, and when should you review it?

What is a rebuild cost?

Your rebuild cost can affect the amount of buildings insurance you need, but it isn’t the same as your property’s market value.

It isn’t the same as the price you paid for your property or what it could sell for today. The Association of British Insurers (ABI) explains that buildings insurance should reflect the cost of rebuilding your property, rather than its market value.

Rebuilding can involve more than replacing the building itself. Depending on your property, costs such as demolition and professional fees may also need to be considered.

Other factors can make a difference too. RICS explains that the building’s construction, its location and access to the property can all influence the cost of rebuilding.

This is why relying on your property’s market value may not give you an accurate cost.

Why does your rebuild cost matter for insurance?

Your rebuild cost helps determine the amount of buildings insurance you need. If the figure isn’t accurate, you could find that your property is underinsured or overinsured.

This isn’t limited to one type of property. In the latest RebuildCostASSESSMENT data, 65% of residential properties and 69% of commercial properties assessed were underinsured. For listed properties, this increased to 79%.

On average, underinsured properties had cover for just 67% of their rebuild cost, while overinsured properties had cover for 131%.

Whether you’re protecting the home you live in, a property you let out or the premises your business relies on, the aim is the same. Your buildings sum insured should reflect what it could reasonably cost to rebuild your property.

What happens if your property is underinsured?

Underinsurance happens when your buildings sum insured is lower than the amount you need to rebuild your property.

You may not realise there’s a problem until you need to make a claim. The Financial Ombudsman Service explains that an insurer may not pay a claim in full if the sum insured is too low. In some circumstances, the insurer may decline the claim.

Some insurance policies also include an average clause. If this applies, your insurer may reduce the amount it pays based on the level of underinsurance.

For example, your property may need £500,000 of buildings cover, but you only insure it for £300,000. This means you have 60% of the amount you need. If your insurer applies an average clause, it could reduce the amount it pays towards a claim by the same proportion.

However, not every policy contains an average clause and insurers don’t all handle underinsurance in the same way. That’s why it’s important to understand how your policy works before you need to rely on it.

Underinsurance can affect other areas of your insurance too. If you run a business, you can read more about the risks of business underinsurance and why regularly reviewing your cover matters.

If you’re unsure, speak to your broker. They can explain your buildings cover and any conditions that could affect a claim.

Can your property be overinsured?

Underinsurance often gets more attention, but having an inaccurate rebuild cost can work the other way too.

RebuildCostASSESSMENT found that 13% of the properties it assessed were overinsured in 2022. By 2026, this had increased to 25%. During the same period, underinsurance fell from 83% to 67%.

Having a rebuild cost that’s too high can mean your buildings sum insured doesn’t accurately reflect your property. It also doesn’t mean your insurer would automatically pay the full sum insured following a claim.

The important thing is getting the figure right. Your figures should reflect what it could reasonably cost to rebuild your property, rather than an amount chosen simply to be on the safe side.

Why can your rebuild cost change?

You might have calculated your rebuild cost several years ago and not thought about it since. However, the cost of rebuilding your property won’t necessarily stay the same.

Construction costs can change over time, while changes to your property can also affect the figure. You may have added an extension to your home, converted a loft or made significant alterations to your business premises since your last assessment.

RICS also highlights several other factors that can influence rebuild costs, including a building’s construction, finishes, installations and location. Access to the property and neighbouring buildings can also affect the work involved.

This means an old rebuild cost may no longer reflect the property you have today, even if you haven’t moved or changed premises.

Do listed properties need particular attention?

If you own a listed, historic or unusual property, calculating an accurate rebuild cost can be more complicated.

The latest RebuildCostASSESSMENT data found that 79% of the listed properties it assessed were underinsured, while a further 15% were overinsured.

RICS explains that specialist materials, finishes and conservation requirements can affect the cost of rebuilding historic properties. The construction of the individual building can also make a difference.

For example, rebuilding a listed property may involve materials or specialist work that you wouldn’t need for a standard modern home. A general estimate may not take these differences into account.

If you’re unsure whether your current rebuild cost reflects your property, a more detailed assessment may be worth considering. This can be particularly important when arranging insurance for a high value home, where a standard approach may not reflect the property.

What is a rebuild cost assessment?

A rebuild cost assessment helps establish how much it could cost to rebuild your property after serious damage or a total loss.

Rather than looking at how much your property could sell for, an assessment considers the building itself. Depending on the property, this can include its size, construction and materials, alongside other costs involved in rebuilding.

How you establish the right figure can depend on the property. A standard home may be relatively straightforward, while a high value, listed, unusual or commercial property could need more consideration.

If you’re unsure whether your current rebuild cost is accurate, speak to your broker. They can help you understand the figure on your buildings insurance and whether you may need an updated assessment.

How often should you review your rebuild cost?

Your rebuild cost isn’t necessarily a figure you can calculate once and forget about.

RICS recommends reviewing the figure each year to account for changes such as inflation. It also recommends carrying out a full reassessment every three years, unless you’ve made significant alterations to the property.

Think about what’s changed since you last reviewed your rebuild cost. Have you added an extension, converted part of the property or completed other significant work? If so, your existing figure may no longer reflect what it could cost to rebuild.

Even if you haven’t made any changes, it’s still worth checking your rebuild cost regularly rather than assuming the figure remains accurate.