House Rebuild Cost versus Value

HomeRestored

Our insurer insisted we had a formal rebuild cost valuation that came in at £1.8m (incl VAT), when the bank recently valued the house at £0.8m. The discrepancy is remarkable! Perhaps there is potential for a new type of insurance policy that would buy us a new house if this one is destroyed, as that should be half the cost!

comeandgo

But it’s not just the rebuild cost the insurer is looking at, it’s the demolition, the clearing up, possibly contamination to sort out, rehousing you.

XRS200

HomeRestored said:

Our insurer insisted we had a formal rebuild cost valuation that came in at £1.8m (incl VAT), when the bank recently valued the house at £0.8m. The discrepancy is remarkable! Perhaps there is potential for a new type of insurance policy that would buy us a new house if this one is destroyed, as that should be half the cost!

That won't always work as some have to be rebuilt, such as mid terrace

daveyjp

A 3 bed semi in some areas of the UK can be £150,000.  The same three bed semi in London can be millions.  Cost to rebuild won't be a factor of 15 or 20 more for the London property.

Aretnap

HomeRestored said:

Perhaps there is potential for a new type of insurance policy that would buy us a new house if this one is destroyed, as that should be half the cost!

Not necessarily. The risk of a total loss claim (the house burning to the ground and having to be rebuilt from scratch) is just one of many risks that your home insurance covers. A large portion of your premium is there to cover more mundane but more likely events - a burglary, a chunk of your roof blowing off in a storm, a small fire meaning that you need a new kitchen, a drunk driver demolishing your garden wall etc etc. Those risks don't change just because the maximum payout is capped at market value rather than the full rebuild cost. So a policy of the type that you suggest would not be half the price of your current policy: it might not be very much cheaper at all.