When renewing your home insurance the insurance company will ask for an estimate of the rebuilding costs. But if you over estimate this figure (over-insure) you will only receive the actual rebuild costs if you have to make a claim. On the other hand if you under estimate the rebuild costs you will only receive the amount insured and you will have to make up the short fall.
Therefore while significant savings can to be made by accurately and carefully calculating the rebuild cost, there is a risk of leaving yourself with a shortfall in the event of a claim. So how does the canny consumer calculate house rebuilding costs?
Thankfully the Society of Chartered Surveyors have a very helpful guidance document and calculator for this very purpose, click here to view. This is very easy to use and covers most properties in most parts of the country. The exclusions should be read carefully along with your own insurance form.
A few other points to note:
- Don’t confuse the market price of your house with the rebuild costs of it.
- The rebuilding costs should be updated every year to reflect changes in construction costs, increases or decreases.
- If a house burns down and has to be demolished. It will be necessary to obtain planning permission for the replacement building. Even if the replacement structure is the same as the previous building. The planning process itself will take a minimum of three months once the application and drawings are submitted. Hence a year can easily pass before the property has been rebuilt from the date of the fire. If the fire occurs close to your renewal date, two years will therefore have passed between the rebuild work being completed and your original estimate of the rebuild costs.
- If a replacement building is required it will have to be built to the current building regulations. In the case of older properties destroyed by fire the replacement property will be a more elaborate and expensive building. This is why it is important to use the guide referred to above and not a simple estimate of replacing what is currently in place.
- If you need to calculate the rebuild costs for a historic, listed or other untypical property expert advice should be consulted.
In my own case when I was filling in my home insurance form, I added 10% to the rebuild cost I calculated as a contingency against inflation