Home Insurance · UK Research 2026

Rebuild cost vs market value

Buildings insurance is priced on your home’s rebuild cost — what it would take to reconstruct it from the ground up — not its market value or sale price. Confusing the two is the single biggest reason UK homes end up under-insured, and it can quietly cut every claim you make.

See rebuild vs market value Home insurance hub

~£1,700/m²

Indicative average UK rebuild cost, 2026 (BCIS)

60–80%

Typical rebuild cost as a share of market value

70–80%

Estimated share of UK homes under-insured

Quick answer

Rebuild cost vs market value, in short

Rebuild cost (also called the reinstatement cost) is what it would cost to demolish and rebuild your home from scratch — site clearance, materials, labour, professional fees and VAT.
Market value is what the property would sell for. It includes the land, location and demand, none of which you insure.
Buildings insurance uses the rebuild cost as the sum insured. In most of the UK it is roughly 60–80% of market value, but for older, larger, listed or rural homes it can match or exceed the sale price.
Insure for the market value by mistake and you are usually over-paying; insure for too little and the average clause can scale down every claim.

The difference

Why the two figures diverge

Market value reflects land and location; rebuild cost does not. A flat in central London can sell for a fortune yet cost far less to rebuild, because most of the price is the ground beneath it. A large period house in a cheaper rural area can be the opposite — expensive to reinstate with matching materials, but modest on the open market. The table below shows indicative 2026 rebuild rates per square metre before any regional adjustment.

Indicative UK rebuild cost per square metre by property type, 2026

Midpoints of typical BCIS-based ranges, before regional uplift (London can add 30–45%).

Source: indicative rates derived from the BCIS House Rebuilding Cost Index, 2026. Illustrative only, not a valuation.

Property type	Indicative rebuild (per m², 2026)	Rebuild vs market value
Terraced house	£1,700–2,050	Often 55–75% of value
Semi-detached house	£1,800–2,200	Often 60–80% of value
Detached house	£1,900–2,400	Often 65–90% of value
Flat / maisonette	£1,850–2,200	Frequently below 60% of value
Period / listed / rural	Varies widely	Can equal or exceed value

Indicative BCIS-based ranges before regional adjustment — not a quote or valuation. Your figure depends on floor area, construction, finishes and location. For average premiums see our average home insurance cost guide.

How to do it

Working out your rebuild cost

You do not have to guess. For most standard homes a free calculator is enough; for anything unusual, a professional assessment is the safe route.

Standard houses: use a free BCIS calculator

The Building Cost Information Service (BCIS) publishes the House Rebuilding Cost Index that insurers rely on. The Association of British Insurers (ABI) and the Royal Institution of Chartered Surveyors (RICS) both offer free BCIS-based calculators: you enter your postcode, property type, age, floor area and features, and it returns an indicative rebuild figure. It takes a few minutes and suits most conventional brick-and-tile homes.

Non-standard homes: get a reinstatement valuation

Calculators assume a typical property. If yours is listed, thatched, timber-framed, of non-standard construction, unusually large or recently extended, a chartered surveyor’s reinstatement cost assessment (RCA) is worth the fee — it reflects matching materials, conservation requirements and site access that a calculator cannot capture. See our guide to non-standard construction home insurance for the wider picture.

Review it every year

Rebuild costs move with materials and labour inflation. The BCIS House Rebuilding Cost Index rose by roughly 42% between early 2020 and late 2024, so a sum insured set a few years ago and simply rolled forward may now sit well below the true cost. Check it at each renewal, and always after an extension or major works. Many policies index-link the sum insured, but that is no substitute for a periodic reality check.

The risk

Underinsurance and the ‘average’ clause

Setting the sum insured too low is not just a smaller safety net — it can shrink a claim you thought was fully covered. Most buildings policies contain a condition of average: if you are under-insured, the insurer reduces the payout in the same proportion.

Worked example

Your home should be insured to rebuild for £500,000, but the policy says £400,000 — you are 20% under-insured. A £50,000 kitchen fire is assessed, the average clause applies, and the insurer pays 80%: about £40,000. You find the remaining £10,000 yourself, even though the loss was far below the sum insured.

The stakes are rising. UK insurers paid a record £6.1 billion in property claims in 2025, and the average household claim reached about £6,340 in early 2026, according to the ABI. With an estimated 70–80% of homes under-insured, an accurate rebuild figure is the cheapest protection you can give yourself. If you are comparing what buildings and contents cover actually includes, see our buildings and contents guide, or return to the home insurance hub.

Common questions

Rebuild cost vs market value FAQs

Should I insure my home for its rebuild cost or its market value?

Use the rebuild cost. Buildings insurance is designed to reinstate the physical structure, so the sum insured should reflect what it would cost to rebuild — not what the property would sell for. Market value includes the land and location, which you do not insure.

Why is rebuild cost usually lower than market value?

Because a large part of a property’s price is the land and its location, which survive most disasters and never need rebuilding. In much of the UK the rebuild cost is roughly 60–80% of market value. For older, larger, listed or rural homes it can be closer to — or above — the sale price.

How do I calculate my home’s rebuild cost?

For a standard house, use a free BCIS-based rebuild calculator from the ABI or RICS: enter your postcode, property type, age, floor area and features for an indicative figure. Indicative 2026 rebuild rates are around £1,700 per square metre nationally, within a broad range of roughly £1,500 to £2,500 depending on the property. For listed, thatched, non-standard or very large homes, commission a chartered surveyor’s reinstatement cost assessment.

What is the average clause and how does it affect my claim?

The average clause is a policy condition that reduces payouts in proportion to any under-insurance. If your sum insured is only 80% of the true rebuild cost, the insurer can pay 80% of an otherwise valid claim — even a small one — leaving you to cover the shortfall. Keeping the sum insured accurate avoids it.

Can the rebuild cost ever be higher than the market value?

Yes. In lower-value areas, or for period, listed and non-standard properties, the cost of reinstating the building with matching materials and to conservation standards can equal or exceed what it would sell for. These are exactly the homes where a professional reinstatement valuation matters most.

How often should I review my rebuild figure?

At least once a year, ideally at renewal, and always after an extension, loft conversion or major refurbishment. Building costs have risen sharply — the BCIS rebuilding index climbed about 42% between early 2020 and late 2024 — so an old sum insured can drift well below reality even if the policy index-links it.

Does the rebuild cost include VAT, demolition and professional fees?

It should. A proper rebuild figure covers demolition and site clearance, materials and labour, architect and surveyor fees, building-control costs and VAT, plus any features such as garages, outbuildings, driveways, boundary walls and landscaping. BCIS-based calculators build these in; make sure nothing is left out.

Our sources

Where these figures come from

BCIS (Building Cost Information Service) — House Rebuilding Cost Index and indicative residential rebuild rates for 2026, and the index change since 2020.
Association of British Insurers (ABI) — record £6.1bn property claims in 2025 and average household claim of about £6,340 in early 2026; free BCIS-based buildings insurance calculator.
Royal Institution of Chartered Surveyors (RICS) — reinstatement cost assessment guidance and rebuild calculator.
Which? and MoneyHelper — consumer guidance on rebuild cost versus market value and underinsurance.

Figures are UK indicative ranges and were correct at the time of writing. They are a guide only and are not a quote or a valuation of your property.

About this guide

Reviewed by the MyInsuranceExpert editorial team

Methodology: rebuild rates are indicative, derived from the BCIS House Rebuilding Cost Index and cross-checked against ABI, RICS and consumer guidance from Which? and MoneyHelper. We use ranges rather than single figures because real rebuild costs vary widely by property and location, and we never present them as a valuation.

Information only — not financial advice. MyInsuranceExpert is not an FCA-authorised intermediary and does not arrange or sell policies. Last updated: 2026-08-12

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