Why it’s important to check the reinstatement cost in a home insurance policy

For homeowners, one of the most important figures in a buildings insurance policy is the reinstatement cost.

This is the amount needed to fully rebuild the property if it were damaged or destroyed. Ensuring this figure is accurate can make a significant difference to your finances in the event of a claim.

 

What is the reinstatement cost?

The reinstatement cost is the total cost of rebuilding a home from scratch. That includes labour, materials, site clearance, and professional fees, such as those for architects and surveyors. It's a practical figure - one based on bricks and mortar, not the value of the land or the current market rate for the property.

Sometimes, homeowners confuse the reinstatement cost with their property's market value. However, a house worth £750,000 to buy could cost far less (or far more) to rebuild, given its physical features. That's why it's so important to get the reinstatement cost right on your insurance policy.

 

Why getting it wrong could cost you more

If a policy underestimates the actual reinstatement cost, there may be a risk of underinsurance. In the event of a claim, the insurer could reduce the payout in line with the shortfall (a principle known as the “Average Clause”) or decline the claim altogether. That could leave the homeowner responsible for a significant portion of the rebuild costs.

On the other hand, overestimating the reinstatement cost in a policy can result in paying too much for the premium year after year.

 

Why it needs to be reviewed regularly

Building costs don’t stand still. Inflation, labour shortages, supply chain issues, and new building regulations can all drive up the cost of materials and construction. Events like Brexit, which have impacted supplies, have had a lasting impact on pricing across the sector.

If your policy’s reinstatement cost hasn’t been reviewed in some time, it may now be out of date. That’s especially true following any home improvements, such as an extension, loft conversion, or new kitchen. These could significantly increase the cost to rebuild the property.

 

It’s often a mortgage requirement

Most UK mortgage lenders require buildings insurance to be based on the property’s reinstatement cost, not the market value. That ensures the lender’s financial interest in the property is protected. If the cover is too low, the mortgage conditions could be breached without the homeowner realising.

 

How to check the reinstatement cost

Tools like the BCIS Rebuild Cost Calculator, produced in association with the Association of British Insurers, offer a reliable starting point for estimating rebuild costs. For more complex or unusual properties (such as listed buildings or those with non-standard construction methods), a professional valuation by a chartered surveyor is the safest option.

At Fidentia Insurance, we have relationships in place with professional and reputable surveyors. We are happy to introduce them, if you would like some assistance in checking the adequacy of your buildings sum insured. Depending on the current sum insured in place, this review may be conducted as a Virtual/Desktop Appraisal or an On-Site Appraisal. Both of these options are available to you at a discounted price if you are a Fidentia client. If this is of interest, please contact us using the details provided below.

 

Peace of mind starts with accurate cover

A carefully calculated reinstatement cost helps ensure a home is neither underinsured nor overstated, and that any mortgage conditions are being met. It’s one of the simplest and most effective ways to safeguard your property in the event of severe damage, and your finances.

At Fidentia Insurance Brokers, we help homeowners ensure their cover is up to date and appropriate. If you’re unsure about whether a current policy reflects the true reinstatement cost, our team is here to help. Contact us on +44 (0)20 3150 0080 or email info@fidentiains.com.