Rebuild cost vs market value — why they're different
Rebuild cost and market value are different things
One of the most common misunderstandings in home insurance is the difference between a property's market value and its rebuild cost. For buildings insurance, the figure that matters is the rebuild cost — not what you paid for the property and not what you could sell it for.
What is rebuild cost?
Rebuild cost is the total cost of demolishing your home down to the foundations and reconstructing it from scratch. This includes: materials; labour; professional fees (architect, structural engineer, project manager); planning and building regulations costs; and debris removal. It does not include the value of the land.
What is market value?
Market value is what a buyer would pay for your property, including the land and reflecting local demand and comparable sales prices. It is influenced by factors like location, local amenity, and the state of the property market — none of which are relevant to the cost of rebuilding.
In most cases, rebuild cost is lower than market value
In many parts of the UK — particularly cities and commuter areas — land accounts for a large proportion of total property value. The rebuild cost, which excludes land, is often significantly lower than the purchase or market price. Insuring your home for its market value would leave you significantly over-insured (and paying a higher premium than necessary).
But rebuild cost can exceed market value
For older properties, listed buildings, unusual constructions, or remote locations, rebuild cost can exceed market value. Traditional materials, specialist trades, listed building restrictions, or complicated site access can make reconstruction very expensive. It is important not to assume the rebuild cost is always lower.
How to find your rebuild cost
Start with our rebuild cost calculator, which uses broad £/m² rates anchored to RICS/BCIS guidance. For accuracy, commission a professional rebuild cost assessment from a RICS-accredited surveyor — especially important for older, listed, or unusual properties.
Frequently asked questions
No. Buildings insurance should be based on the rebuild cost — the cost to demolish and reconstruct your home from scratch. Market value includes the land and reflects buyer demand, neither of which is relevant to rebuilding.
Market value includes the value of the land, which cannot burn down or be destroyed. It also reflects local demand and comparable sales. In many parts of the UK, land is a significant portion of total property value, making rebuild cost lower.
For older, listed, or unusual properties, the rebuild cost can exceed market value. Specialist materials, traditional construction methods, planning requirements, or listed building constraints can make rebuilding very expensive.
At least annually, and whenever you make significant structural changes or extensions. Rebuild costs have risen significantly in recent years — a figure set several years ago may now be inadequate.
Related calculators
Home insurance
Rebuild Cost Calculator
Get a rough estimate of your home's rebuild cost — which is not the same as its market value.
Home insurance
Underinsurance Calculator
Check whether your sum insured may leave you underinsured and estimate the potential shortfall.
Home insurance
Contents Insurance Calculator
Build up an estimate of what your home contents are worth to replace.
Disclaimer
This is a simplified estimate based on the assumptions shown above. It isn't a quote, and a real insurer may arrive at a different figure. Use it as a starting point, then check the details with your insurer or adviser.