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How do I calculate the rebuilding cost for
my building insurance?
When you buy a property, you would be foolish not to insure the
building. If you have taken out a mortgage, your lender will insist
on you taking out buildings insurance.
When you do so, you are covering the property against all sorts
of risks. This covers the structure, but also the fittings in the
property which couldn’t be taken should you move.
One of the questions you will need to answer when you apply for
buildings insurance
is the value of your property. This is NOT the market value Instead,
it is the cost that would be incurred by the insurer of rebuilding
the property should something happen to the property that makes
it uninhabitable. So, how do you work this out?
To help you, the Association of British Insurers has produced
a two page information sheet called “How to work out the rebuilding
cost of your home”, and the Royal Institution of Chartered
Surveyors has produced an information sheet called “Guide
to House Rebuilding Costs for Insurance
Valuation”.
However, to be absolutely sure, you should get a surveyors report,
and bear in mind that if you are buying a property, the lender’s
valuation report has to contain a rebuilding figure.
Should you take on working out the cost of rebuilding yourself,
you need to know the dimensions of your building. This is done by
following these steps:
• Calculate your ground floor area (length x width)
• Calculate the total floor area (ground floor area x number
of storeys)
• Calculate the total rebuilding cost (total floor area x
rebuilding cost per square foot).
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The rebuilding cost per square foot varies depending on where in
the UK you live, so for example you may find that your insurer will
set a rate list for the UK. In London, for instance, the rebuilding
cost could be very high, whilst there are places in the
rest of the UK where the rebuilding cost per square foot could be
a lot lower.
As an example, should you live in Manchester, where the rebuilding
cost per square foot is hypothetically £46, and your property
is 20 years old, and your house is of 2 stories and is 30ft wide
and 40ft long, here is your calculation:
Ground floor area = 30 x 40 = 1200 sq. feet
Total floor area = 1200 x 2 = 2400 sq. feet
Therefore, the rebuilding cost is
2400 x £46 = £110,400
So, the amount of cover you would need for buildings insurance purposes would be £110,400. This is of course only a guide,
but at least you can understand how the figures are arrived at.
(Please note that these figures are for illustration purposes only - the real costs will depend entirely on each individual set of circumstances) |
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