Home insurance: Rebuild value v market value

collinsca

Hi
I heard a short snippet of Martin Lewis saying that when applying for home insurance you should put the value of the rebuild of your property NOT the market value.

Does anyone know what podcast this was on?

I don't understand how you would calculate the rebuild value - anyone any ideas?

Thanks!

collinsca

I have now found this article: How to calculate the rebuild cost of your home - MSE (moneysavingexpert.com)

But i am keen to know what podcast it was.

thanks

Aretnap

He had probably said it many times in on many podcasts and TV programmes. It's a standard piece of advice which people often get wrong. If your house burns down your insurance company will rebuild it rather than buy you a new house somewhere else. So it's the cost of rebuilding it that matters for insurance purposes. That's usually lower than the market value, for the obvious reason that people don't tend to build houses if they're going to cost more to build than they will sell for.

If you're looking for a specific podcast you are going to have to narrow it down a bit.

collinsca

Thanks - actually no the podcast is not important - the response you have given is exactly what i'm after.

Thanks again!

DullGreyGuy

collinsca said:

Hi
I heard a short snippet of Martin Lewis saying that when applying for home insurance you should put the value of the rebuild of your property NOT the market value.

Does anyone know what podcast this was on?

I don't understand how you would calculate the rebuild value - anyone any ideas?

You need to answer the question asked, 99% of insurers (exc bedroom rated policies) ask for rebuild cost.

If you bought the property recently then the survey will have given the rebuild value. If it was a while ago then RICS have a basic tool for estimating it. 

The alternative is to buy a room rated policy that will have a very high (eg £1m) limit or potentially even unlimited and then you avoid the risk

DigForVictory

Aretnap said:

He had probably said it many times in on many podcasts and TV programmes. It's a standard piece of advice which people often get wrong. If your house burns down your insurance company will rebuild it rather than buy you a new house somewhere else. So it's the cost of rebuilding it that matters for insurance purposes. That's usually lower than the market value, for the obvious reason that people don't tend to build houses if they're going to cost more to build than they will sell for.

If you live in a slightly odd property, the rebuild can be more than the market value. Or if it was built some time ago.  For example, Listing doesn't add value to the sale price, but can mean the rebuild cost is a bit higher than you wany to contemplate.

user1977

DigForVictory said:

Aretnap said:

He had probably said it many times in on many podcasts and TV programmes. It's a standard piece of advice which people often get wrong. If your house burns down your insurance company will rebuild it rather than buy you a new house somewhere else. So it's the cost of rebuilding it that matters for insurance purposes. That's usually lower than the market value, for the obvious reason that people don't tend to build houses if they're going to cost more to build than they will sell for.

If you live in a slightly odd property, the rebuild can be more than the market value. Or if it was built some time ago.  For example, Listing doesn't add value to the sale price, but can mean the rebuild cost is a bit higher than you wany to contemplate.

Something joined onto other properties, and/or where market prices are relatively low. Buy a mid-terrace house somewhere cheap and I expect the rebuild costs (incuding propping up the neighbours, difficult access etc) are likely to be more than the original price.

Aretnap

DigForVictory said:

Aretnap said:

He had probably said it many times in on many podcasts and TV programmes. It's a standard piece of advice which people often get wrong. If your house burns down your insurance company will rebuild it rather than buy you a new house somewhere else. So it's the cost of rebuilding it that matters for insurance purposes. That's usually lower than the market value, for the obvious reason that people don't tend to build houses if they're going to cost more to build than they will sell for.

If you live in a slightly odd property, the rebuild can be more than the market value. Or if it was built some time ago.  For example, Listing doesn't add value to the sale price, but can mean the rebuild cost is a bit higher than you wany to contemplate.

True, hence "usually". Also if you live in one of those empty streets in Middlesbrough or Hull where houses change hands for a few thousand pounds when they can be sold at all, the rebuild cost is probably greater than the market value. But on average it tends to be lower.