Rebuild Value

When you are arranging insurance for your home or let property you will need to know the rebuild value of the building. The following terms are commonly used when describing this value and all relate to the same thing:

Rebuild value
Reinstatement value
Building sum insured

You should note that the rebuild value and the sale price of your property will be different and failure to insure your building for the correct amount can result in a claim being repudiated.

Why is the rebuild value different from the sale price?

The rebuild value takes into account the costs of clearing the site ready for rebuilding the property and associated costs however the sale price is literally just for the sale of the property. Generally the rebuild figure is lower than the sale price because even if the property was to be completely demolished you would still own the land which the property sat on which is usually worth a substantial amount in its own right. If you were to take this point to extremes then the following offers an insight into why the rebuild value cannot be based on the sale price:

Property 1:

Location: Small town in Essex
Property: 2 bedroom detached house
Sale price: £200,000
Rebuild value: £120,000

Property 2:

Location: Next to Buckingham Palace
Property: 2 bedroom detached house
Sale price: £2,000,000
Rebuild value: £120,000

There are however some circumstances where the rebuild value may be higher than the sale price.

How do I find out the rebuild value?

Many property owners have a survey of their property undertaken before they purchase it to check for any structural problems and such like. If you have a mortgage for the property then you may find that the lender has had their own survey carried out. The figure on these surveys is the most accurate way to determine the rebuild cost, however you should take into account that if the survey is old then the figure may now be different.

If you do not have a survey then there are rebuild calculators available online such as the one offered by the Association of British insurers (ABI). However these tools can only offer an estimate and no guarantee can be offered as to how accurate the figures are.