Blog - Rebuild Costs in your Insurance Policy

Rebuild Costs in your Insurance Policy

Why It's Crucial to Insure Your Property for the Correct Rebuild Cost

Imagine this: a fire, storm, or another disaster destroys your property. You think you're covered because you have insurance. But when it comes time to rebuild, you discover your policy only covers $400,000—yet the true cost to rebuild is $700,000. Suddenly, you're $300,000 out of pocket.

This is a common and costly mistake many property owners make: underinsuring their home.

What Is the Rebuild Cost?

The rebuild cost is the amount it would take to completely rebuild your home from scratch at today’s prices. It includes the cost of materials, labour, permits, debris removal, architect fees, and sometimes even temporary accommodation if needed. It is not the market value of your property, which includes the land—it’s the cost to replace the physical structure.

Why Market Value ≠ Rebuild Cost

Many people assume their home insurance should match what their property is worth on the market. But market value includes the land and location—not just the bricks and mortar. Rebuild costs, on the other hand, are based on construction expenses which fluctuate due to inflation, building code changes, supply chain issues, and trades shortages.

What Happens If You're Underinsured?

If you're underinsured, your insurance payout may not be enough to cover the full cost of rebuilding your home. That means:

• You may have to pay the difference yourself

• You could be forced to rebuild a smaller home

• In some cases, you might not be able to rebuild at all

Let’s break it down:
If your policy covers $400,000 but the rebuild cost is actually $700,000, you’re underinsured by over 40%. Even a partial claim—for example, from storm damage—could result in a reduced payout due to what's known as the "average clause" or "proportional settlement".

How to Get It Right

• Use the Sum Sure Rebuild Calculator to get an estimate rebuild cost for your property here: Sum Sure 

• Get a professional rebuild estimate – A quantity surveyor or a builder can provide an accurate assessment which is a step above the online calculator

• Update your policy regularly – Building costs change frequently. It’s smart to review your insurance annually.

• Include everything – Garages, sheds, fences, driveways, and even landscaping might need to be replaced.

• Consider inflation protection – Some insurers offer policies that automatically adjust for rising costs.

Peace of Mind Matters

Insuring for the correct rebuild cost may cost a little more in premiums, but it could save you hundreds of thousands of dollars—and your financial future—if the worst happens. It’s a simple step that gives you peace of mind and true protection.