Our home insurance policy comes with a blanket sum insured covering the buildings and contents.
I imagine it’s a really economical way to provide insurance for the insurance company itself, because they don’t have to underwrite each risk individually, just bung a bunch of bog-standard risks into a basic policy. It’s good value for money. We don’t need to worry too much about getting the sums insured right. And it’s index linked, which is handy.
But most home insurance policies demand you give them the right sum insured for buildings and contents. And for buildings cover, most people just tell the insurers the market value of their home, or what they paid for it. Which means they’re insuring their home for much more than they need to, and paying far too much in premiums.
How come? The market value of your home, or the amount you paid for it (they can obviously be different), is made up of the value of the land it’s built on, plus the cost of rebuilding it from scratch if it falls down or completely disappears for some reason, plus an arbitrary sum that has nothing to do with anything concrete, just the vagaries of the housing market in your area. The rebuilding cost, however, is all you actually need to insure.
Which begs the question: how do you find out the rebuilding cost of your home so you can insure it for the right amount?
Finding out the rebuilding cost of your house
Sadly it’s far from straightforward. As confused.com recommends, the most reliable way is to get a surveyor on the case at a cost of around £200.
Alternatively you can use an online rebuilding cost generator tool. There’s one on the ABI site, accessible via the link above. It requires an awful lot of measuring. And it only gives you a rough idea. But it might be better than insuring for far more than you need to. I reckon it’s worth a go, though, simply to avoid lining insurers’ pockets unnecessarily.
Problems arise when your house is made of weird stuff, anything insurers think is ‘non standard’, like a thatched roof or anything but ordinary brick or stone. You also run into rebuilding cost calculation problems when your home has a basement or special design features, is listed, historic, sub-standard or better than average, particularly large or includes dangerous stuff like asbestos.
What if you live in a flat?
If you live in a flat you’re stuffed, really, because it’s more or less impossible to un-pin the rebuilding cost of your flat from the rest of the block.