Insurance Property Valuations: Why a Rebuilding Cost Assessment Could Save You Big
Let’s be real – insurance isn’t the most thrilling topic. But it sure becomes front and centre when something goes wrong. Floods, fires, freak accidents… stuff happens. And when it does? You want to be confident that your insurance won’t let you down. That’s exactly where a Rebuilding Cost Assessment (RCA) comes in.
It might sound like a fancy term that belongs in a surveyor’s handbook, but trust us – this little calculation could mean the difference between a smooth recovery and a financial nightmare.
What Is a Rebuilding Cost Assessment?
Simply put, it’s the estimated cost to completely rebuild your property from the ground up, using current materials and labour rates. This includes everything: Clearing the site, hiring tradespeople, buying bricks and timber, and even paying architects and engineers.
Importantly, it’s not the same as your home’s market value. Market value is based on location, nearby schools, and how nice your kitchen looks. Rebuild cost? It’s all about structure, size, and the nuts and bolts of getting your place standing again.
Sometimes you’ll hear it called a Rebuild Cost Assessment or even a Building Insurance Valuation. Different names, same crucial purpose.
Why It Matters More Than You Think
If your property is underinsured, your insurer may not cover the full cost of rebuilding. This isn’t just a minor inconvenience – it could leave you tens or even hundreds of thousands out of pocket.
But here’s the kicker: even if you’re only slightly under the correct rebuild value, you could still get penalised because of something called the Average Clause in Insurance.
What Is the Average Clause in Insurance?
Let’s explain this in real terms.
Imagine your home’s true rebuild cost is £500,000. But you’ve insured it for £400,000 – maybe you guessed or used an online calculator. Then one day, a fire causes £100,000 in damage.
You might think, “Well, I’ve got £400k cover, so £100k should be no problem.”
Not quite.
Because of the Average Clause, your insurer will only pay out in proportion to the amount you insured. That means:
£400k / £500k = 80%.
You’ll only get £80,000, not £100,000. The rest? That’s on you.
Rebuild Cost Assessment vs Market Value: Know the Difference
Many homeowners confuse these two figures. But they couldn’t be more different:
Aspect | Market Value | Rebuilding Cost Assessment |
---|---|---|
Includes land value? | ✅ Yes | ❌ No |
Affected by location? | ✅ Yes | ❌ No |
Reflects current labour/material cost? | ❌ No | ✅ Yes |
Used for insurance? | ❌ No | Reflects the current labour/material cost? |
So, insuring your home based on its market value could mean overpaying premiums or being underinsured. Either way, not ideal.
When Should You Update a Rebuilding Cost Assessment?
It’s not a once-in-a-lifetime thing. Building costs change. Inflation happens. And if you’ve added an extension or done major renovations, your original rebuild figure might be way off.
Here’s when to revisit your RCA:
- Every 3 – 5 years, as a general rule
- After major home improvements
- If your home is listed or unusual
- When switching insurers
Quick heads-up: if you haven’t had a Building Insurance Valuation in over five years, you’re probably out of date.… Read More