Introduction: A Hidden Risk in a Changing Market
Even the most careful homeowner can get caught out by today’s fast-changing housing market. The cost of rebuilding has soared, and while we all keep an eye on interest rates and house prices, it’s easy to forget one number that could really matter: how much it would actually cost to rebuild your home if life threw you a curveball, whether that’s storm damage, a burst pipe, or worse. It’s not about doom-and-gloom thinking; it’s about peace of mind knowing your insurance can put things right in the very situations it’s there to protect you from.
Over the past few years, the housing and construction landscape has changed dramatically. Supply chain challenges, rising labour costs and inflation have all pushed up the price of building materials and trades. As a result, the cost to rebuild a property, known as the reinstatement value, has climbed much faster than most homeowners realise.
According to data from the Building Cost Information Service (BCIS), reinstatement costs have increased by an average of nearly 4% this year alone, on top of substantial rises since 2020. For many, this means their home insurance may no longer reflect the true cost of rebuilding their property today.
It’s an issue that can catch even the most responsible homeowners off guard, and one that Cherry Godfrey and Steven Morley Chartered Surveyors are keen to highlight. Together, we’re encouraging property owners to take a closer look at their policies and understand what underinsurance really means.
What Is Underinsurance?
Underinsurance might sound like something that only happens to “other people”, until the storm rolls in and your trusty umbrella suddenly turns inside out. That’s when you realise the cover you thought was sturdy might not be built for today’s weather.
Underinsurance occurs when your home’s insured value, the amount your insurer would pay to rebuild it, is lower than the actual cost to do so.
If your home is underinsured, you could receive only a proportionate payout in the event of a claim. For instance, if your property should be insured for £500,000 but is only covered for £250,000, your insurer may only cover half of any damage, even if the claim is much smaller.
This can leave homeowners facing unexpected shortfalls and difficult financial decisions at the worst possible time.
Why Rebuild Costs Have Soared
The pandemic triggered a chain reaction in the construction industry that’s still being felt today.
- Labour costs have risen by more than 20% since 2019, with skilled trades in short supply.
- Material prices from timber to concrete remain elevated due to global supply constraints.
- Inflation and logistics costs continue to add pressure, especially in island communities and remote areas.
These factors combine to make rebuilding a home far more expensive than just a few years ago, even if it’s a standard property.
Real Examples from Steven Morley Chartered Surveyors
“We’ve seen a typical 1970s three-bedroom semi rise from £200,000 to £360,000 in rebuild costs since 2015.
A modern four-bed home has gone from £325,000 in 2019 to over £600,000 today.
And a Victorian mid-terrace has jumped from £560,000 to £940,000 since late 2020.”
Quoted Steven Morley Chartered Surveyor
“These examples show just how quickly costs can rise and just how easy it is for even recently updated policies to fall behind.”
How to Protect Yourself
The good news is that underinsurance can be avoided with a few straightforward steps:
- Check your policy - Look at the reinstatement value or sum insured figure on your home insurance documents.
- Get a professional review - A Chartered Surveyor (RICS-registered) can carry out a Reinstatement Cost Assessment (RCA) using the latest BCIS data to calculate a realistic rebuild value.
- Review your cover regularly - Costs change quickly, so it’s worth reassessing your insurance every few years, or after major home improvements.
Alexie McGrath, Insurance Director at Cherry Godfrey IOM said “It’s easy to assume your insurance policy automatically keeps up with the market, but rebuild costs can change dramatically in just a few years.
Taking time to review your cover and speaking with an experienced broker ensures your policy truly reflects today’s rebuild values giving you peace of mind that your home is properly protected. It’s a small step that makes a big difference to your peace of mind.”
A Shared Responsibility
Insurers have a responsibility to ensure their products offer fair value and meet customers’ needs. Homeowners also play an important role by providing accurate information.
By working together, insurers, surveyors, and property owners can make sure insurance cover keeps pace with real-world costs. It’s a team effort that protects both your home and your peace of mind.
In Summary
Underinsurance is an invisible risk that can have serious financial consequences, but it’s one that’s easily addressed with expert guidance.
If you haven’t reviewed your home insurance or rebuild cost in the past few years, now is the time. Speak to Cherry Godfrey for advice on your cover, or contact Steven Morley Chartered Surveyors for an up-to-date professional assessment.
Together, we can make sure your property is protected for its real value.
