Rebuild cost higher than purchase price

[ringstrawpot]

We’ve just taken out a new insurance policy. The company then ran a survey and have come back and said we owe an extra amount since the rebuild value was originally too low.

They have said that the rebuild cost is around 50% more than we paid for the property 8yrs ago, so clearly considerably more than the house is worth on the open market. There is no house anywhere near us which has recently sold for anything like this amount. The house is not special in terms of its building materials etc. It also has a large garden which presumably does not figure in the rebuild calculations but would factor heavily in the sale price.

We are about to start building works and have been told by the company in charge of these that they would expect the rebuild costs to be around 60% of what the insurance company is claiming they are.

We have queried the extra payment and been told we essentially have no choice if we want a valid insurance policy.

What can we do? We feel trapped and manipulated.

Get another quote?

Rebuild shouldn't ever be more than current price (unless bonkers style of build) as you already own the land

Our insurance company (NFU) reckons the rebuild cost of ours would be about 50% more than the house would sell for. However it is stone built with quite a lot of detail that would have to be hand crafted, so not at all standard construction.
Surely if your company agreed to insure you for a certain amount they'd have to stick by it until renewal time came around - or was the quote conditional on the results of a future survey?

That is really common

The rebuild cost of my house is more than it’s worth too. It’s because it’s made from stone with thick walls and they don’t build houses like this anymore. My insurance company didn’t seem surprised at difference i. Valuation/ rebuild cost.

Very common, particularly with older properties where the rebuild would involve specialist trades that are less common there days (eg stonemason)

Shop around again and cancel if you find a cheaper policy.

Rebuild costs include an amount for demolition and clearing the site. Where I live it's significantly more to build than buy at the moment. Material costs have risen considerably since covid. I own two houses, both policies have much higher than value rebuild costs.

Thank you. Clearly it’s more nuanced that I thought. The house isn’t particularly special though: it was built in the 1970’s. No particular materials or special workmanship…

The rebuild cost for insurance for our house is nearly half a million more than its current value - listed farmhouse sat in a conservation area. Agree with pp that it's to do with needing to replace original features etc so specialist crafts people would be needed. Not sure how that applies to your property though?

Underinsure at your own risk. Understand what the consequences of under insuring are.

Our buildings insurance has the rebuild cost as more than the house is worth, I always thought it was the wrong way round but it is what it is. Its just a bog standard 20s semi

Where a house is in a low value area it’s very easy for rebuilding to cost more. Many insurance companies have a guide to how to work out rebuild costs. If you are under insured they won’t pay out. So look at what rebuilding is likely to be based on up to date building costs and clearance costs. The Associstion of British Insurers also has helpful info.

Thanks all. Not a low value area so maybe it’s just one of those things…

I might be a little late to this post so sorry if this is no longer relevant. My girlfriend brought this thread to my attention and I feel I might be able to offer some help, so I thought to reach out in any case.

I'm actually the co-founder of a company called Don't Guess, we specialise in independent rebuild cost estimates. I'd love to see if we can help you out in this situation, I wouldn't want to make any promises I can't keep, but we can offer a survey (completely free of charge) If you'd be interested feel free to reach out to me personally: [email protected] and we'll see if we can help.

Sorry for the long winded message!

I have never known a rebuild to be CHEAPER than the market value of the property.

The house we where buying was £90k but rebuild quote was more like £300k. It costs a LOT to raze and rebuild a whole house.