Seven in ten UK homes are insured for less than they need to be. That’s according to figures from Rebuild Cost Assessment, which found the average underinsured property is covered to just 63 per cent of what it would actually cost to rebuild. If your home would cost £300,000 to reconstruct and you’re insured for £189,000, you’d be £111,000 short after a complete loss. That isn’t a premium problem — it’s a gap that could leave you unable to rebuild at all.
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This article is general information only and does not constitute professional advice. For your specific situation, consult a qualified professional.
Most people pick a sum insured based on what they paid for the house or its market value. That number has almost nothing to do with rebuild cost. Construction inflation has pushed up building costs sharply in recent years, so the gap between what a policy covers and what a rebuild actually costs keeps widening. Johnny Thomson of Rebuild Cost Assessment put it bluntly: out of every ten properties on a typical high street, seven are underinsured, two are overinsured, and maybe one has the right cover. The stakes are serious — after a fire or explosion, being underinsured can mean you cannot afford to repair your home. Here’s what you actually need to know.
Key Takeaways — The Four Numbers That Matter Most
I look at numbers like these and the first thing that strikes me is how lopsided the market is. Nearly everyone is on the wrong side of the line. The core problem is that most people confuse market value with rebuild cost. One is what a buyer would pay. The other is what a builder would charge to reconstruct your home from scratch — including materials, labour, architect fees, site clearance and VAT. That second figure is what your insurer needs to know. The term for the gap between what you’re insured for and what you’d actually need is underinsurance.
What I tend to notice is that people update their car insurance every year without thinking, but let home insurance auto-renew for years without checking the rebuild figure. That’s where the trouble starts. If you choose the right property insurance from the beginning, you’re already ahead — but you still need to revisit the number every year.
The True Cost of Underinsurance — What 63% Cover Actually Means for Your Home
The headline number from the research is that underinsured homes are covered to just 63 per cent of rebuild cost on average. That figure hides a wide spread. Some homes are very close to being correctly insured. Others are catastrophically short. The distribution across all UK homes tells the story better.
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| Category | Proportion of UK Homes | What It Means for You |
|---|---|---|
| Underinsured | 70% | You’d need to find tens or hundreds of thousands from your own pocket after a total loss |
| Overinsured | 25% | You’re paying higher premiums than necessary for cover you’ll never use |
| Correctly insured | 5% | Your sum insured matches rebuild cost — you could rebuild fully after a claim |
Construction inflation is the hidden factor most people miss. The research notes that rising costs have widened the insurance gap significantly in recent years. A policy set two years ago might have been reasonable at the time. Today, the same sum insured could be 20 or 30 per cent too low, depending on local build costs. If you’re a basic-rate taxpayer, the premium difference between correct cover and underinsurance is often small — the risk of being wrong is enormous.
Where the Research Shows Homeowners Slip Up — Three Specific Gaps
The data from Rebuild Cost Assessment points to three patterns that keep coming up. Each one is avoidable once you know what to look for. I’d start with the most costly one first, because that’s where the financial damage is biggest.
Insuring for Market Value Instead of Rebuild Cost
Market value includes the land your house sits on. Rebuild cost does not. Land can be half or more of a property’s market value in some parts of the UK. If you insure for £500,000 because that’s what your home is worth on the open market, but the rebuild cost is only £280,000, you’re overinsured by £220,000 — paying premiums on cover you don’t need. If you insure for £300,000 market value when the rebuild cost is actually £420,000, you’re underinsured by £120,000. The fix is straightforward: ask your insurer or a surveyor for a rebuild cost assessment. It is a completely separate number from market value and should be the only one on your policy schedule.
Not Updating Cover After Home Improvements
A loft conversion, a kitchen extension, a new conservatory — each one adds to the rebuild cost of your property. Property insurance after a renovation is one of the most common gaps I come across. People spend tens of thousands on improvements and never tell their insurer. The result is that the sum insured stays where it was before the work, while the actual rebuild cost has increased. If you’ve done any structural work in the past few years, check whether your policy has caught up. A quick call to your insurer can sort it in minutes. For extra peace of mind, a Yale Smart Home Alarm can also reduce risk by deterring break-ins that might lead to a claim in the first place.
Ignoring Construction Inflation at Renewal
Insurance renewals often arrive with a small premium increase and no obvious change to the sum insured. Many people pay the new premium and move on. But construction costs don’t stand still. The research from Rebuild Cost Assessment points to inflation in building materials and labour as a key reason the underinsurance gap keeps widening. A policy that was right at the last renewal can be wrong six months later. What I do is check the rebuild cost index published by the Association of British Insurers or the Building Cost Information Service before each renewal. If the rebuild figure has gone up by 10 per cent and your sum insured hasn’t, you’re now underinsured by that amount.
How to Get Your Cover Right — A Practical Walkthrough
Getting the right cover isn’t complicated. It takes about 30 minutes and a couple of pieces of information. Here’s the sequence that makes sense for most people.
Get a Rebuild Cost Assessment
You can get a rebuild cost figure from three places: your insurer’s online calculator, a professional surveyor, or the Building Cost Information Service. The most accurate option is a professional assessment, especially for older or non-standard homes. Many insurers will also provide a rebuild figure if you give them your property’s age, size, construction type and number of storeys. The figure you get back is the number to insure for — not the price you paid for the house, not its market value, and not the amount on last year’s renewal letter.
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| Assessment Method | Typical Cost | Best For |
|---|---|---|
| Online rebuild calculator | Free | Standard homes, quick check |
| Professional surveyor | £150–£400 | Older homes, listed properties, unusual builds |
| BCIS rebuild cost index | Free to access | Adjusting existing cover year-on-year |
Compare Your Current Sum Insured to the Rebuild Cost
Once you have a rebuild figure, compare it to the sum insured on your policy schedule. If the rebuild cost is higher, you need to increase your cover. If it’s lower, you can reduce it and save on premiums. The difference is often surprising. I’ve seen cases where the rebuild cost was double the sum insured, and others where the homeowner could cut their premium by a quarter. Do this comparison every year before renewal, not after. Once you’ve set the right number, consider a FireAngel Smoke Alarm and a X-Sense Wi-Fi Water Leak Detector to help prevent the kinds of claims that would test your cover in the first place.
Set a Calendar Reminder for Every Renewal
The single most effective habit is to review your rebuild cover on a fixed date — your renewal date works well. Put it in your calendar with a note to check the current rebuild cost index and compare it to your sum insured. If construction costs have risen, bump your cover up. If you’ve done building work during the year, update the figure. This is not a set-and-forget task. The reason 70 per cent of homes are underinsured is precisely that people set it once and never look again.
Consider Index-Linked Cover for Automatic Adjustments
Some policies include index linking, which automatically adjusts your sum insured in line with construction cost inflation. This can close the gap year on year without you needing to act. Check whether your policy has this feature — it’s not always standard. If it does, check what index it uses and whether the adjustment has kept up with real local building costs. If it hasn’t, you may still need a manual top-up. Technology in the smart home space can also help by giving you real-time data on your property’s condition, but nothing replaces a straightforward rebuild cost check.
Frequently Asked Questions
Is rebuild cost the same as market value? ▾
What happens if I’m underinsured and need to claim? ▾
How often should I check my rebuild cost? ▾
Can I be overinsured and still have problems? ▾
Does contents insurance have the same issue? ▾
Will a higher sum insured mean a much higher premium? ▾
The One Thing to Do Before Your Renewal Date
The research from Rebuild Cost Assessment makes one thing clear: you cannot rely on your insurer, your mortgage lender or your estate agent to tell you the right rebuild figure. That number is your responsibility. Before your next renewal date, get a rebuild cost assessment for your property. Compare it to the sum insured on your current policy. If they don’t match, change the policy. The seven-in-ten statistic means most people reading this article are underinsured. You now know how to check whether you’re one of them.
Remember: this article is general information only. For advice on your specific situation, speak to a qualified professional.
If this was useful, you might also want to read Tips for Understanding Your Property Insurance Certificate in the UK.
Sources and Further Reading
The Ultimate Guide to Choosing the Right Property Insurance in the UK — A complete walkthrough of cover types, exclusions and policy features beyond just the sum insured.
Property Insurance After a Renovation — Has Your Policy Kept Up? — Specific guidance on updating your cover after building work, with steps to avoid the most common gap.
ThisIsMoney (2024). Seven in 10 homes are underinsured — here’s how to ensure your property isn’t one of them. 🔗
Rebuild Cost Assessment (2024). Industry data on UK property underinsurance levels. Data cited via ThisIsMoney report above. 🔗
