’As house prices fluctuate, it’s important not to confuse your home’s value with its rebuild cost,’ says expert
Millions of homeowners are at risk of underinsurance due to rising rebuild costs, new data from Go Compare Home Insurance has revealed.
Published today (21 November 2023), figures revealed that prices for repairs should a house be destroyed jumped by more than £100,000 over the last five years, rising from £194,000 in 2018 to £300,000 in 2023.
However, some 40% of 2,000 homeowners said they did not know that the price of a rebuild would need to be updated on a home insurance policy.
And Go Compare warned that if people underestimate the cost or fail to update it, insurers may not pay out the full cost of repairs when a claim is made.
This means that buildings insurance policyholders could potentially lose out on a combined sum of £196.5bn should they need to claim.
While an increased rebuild cost would impact premiums, Ceri McMillan, home insurance expert at Go Compare, said people could find themselves “heavily out of pocket” if prices were not checked.
“The rebuild cost of your property is likely to impact your insurance premiums,” she added.
“It’s an estimate of how much it would cost to completely rebuild your home if it was destroyed by an unexpected event such as a fire or a flood and unfortunately, due to rising prices, this is one reason customers may see premiums increase.
“As house prices fluctuate, it’s important not to confuse your home’s value with its rebuild cost.”
Costs involved in a house rebuild include the price of labour as well as materials and surveys.
The Building Cost Information Service (BCIS) recommends that rebuild costs be checked at least every five years to ensure homeowners are not left out of pocket.
“The rise in rebuild costs is linked to inflation, as labour and raw materials increase in price,” McMillan added.
“That’s why homeowners need to be aware that this figure needs updating regularly.
“If not, you could find yourself heavily out of pocket should you ever need to claim.”
His career began in 2019, when he joined a local north London newspaper after graduating from the University of Sheffield with a first-class honours degree in journalism.
Now working within the insurance sector, James has a particular focus on motor, M&A activity and financial reporting.View full Profile