Here's a question most property owners have never properly considered: if your property burned to the ground tonight, would your buildings insurance actually cover the full cost of rebuilding it?
For a significant number of UK property owners, the answer is no. Research consistently shows that somewhere between 50% and 80% of UK properties are under-insured — many by more than 40%. That's a potentially catastrophic financial exposure.
A Reinstatement Cost Assessment (RCA) — carried out by a RICS-accredited surveyor — is the definitive way to find out whether your insurance cover is adequate. And the cost of one is a tiny fraction of what under-insurance could cost you.
What Is a Reinstatement Cost Assessment?
A Reinstatement Cost Assessment (also known as a rebuild cost assessment or building reinstatement valuation) is a professional calculation of the total cost of demolishing your existing property and rebuilding it from scratch to the same specification — including all associated costs.
This is not the same as the property's market value. In fact, the relationship between market value and reinstatement cost is complex and non-linear:
- For a modest flat in a purpose-built block in Chiswick, the reinstatement cost may be significantly higher than the market value — because construction costs are high relative to the value of the unit
- For a large Victorian house in Bedford Park, the reinstatement cost may be lower than the market value — because the land value is a significant component of market value and land doesn't need to be "rebuilt"
- For commercial properties, the relationship varies enormously by property type and specification
What Does a Reinstatement Cost Include?
A properly conducted RCA includes all the costs you'd actually face if you needed to rebuild, including:
- Demolition and site clearance: Often overlooked, demolition of a Victorian house in London can cost £20,000–£50,000 before any rebuilding begins
- Foundations: New foundations to current Building Regulations standards
- Superstructure: Walls, roof, floors — rebuilding to match the original specification
- Internal finishes: Plasterwork, flooring, joinery and fittings
- Services: Electrical, plumbing, heating and drainage to current standards
- Professional fees: Architect, structural engineer, planning consultant and project manager
- Planning and Building Regulation costs
- VAT on all relevant elements
- Allowance for inflation during the rebuild period
Why Are So Many Properties Under-Insured?
There are several common reasons:
- Original insurance based on purchase price or market value: Many policies are set up when a property is purchased, using the purchase price or the mortgage lender's valuation as the sum insured. Neither of these figures is a reinstatement cost.
- Inflation in construction costs: UK construction costs have risen dramatically in recent years — by over 30% since 2020 according to BCIS data. Many policies aren't reviewed regularly enough to keep pace.
- Significant improvements not notified to insurer: If you've added an extension, converted the loft or significantly refurbished the property, the reinstatement cost will be higher — but your insurer may not know.
- Using online calculators: The rebuilding cost calculators provided by insurers or online tools are often very inaccurate, particularly for older, non-standard or unusual properties.
What Happens If You're Under-Insured and Need to Claim?
This is where it gets serious. Most buildings insurance policies contain an "average clause". If your property is under-insured, the insurer can reduce any claim payment in proportion to the degree of under-insurance.
Example: Your property has a true reinstatement cost of £600,000 but you're insured for £400,000 (two-thirds of the correct amount). You suffer fire damage that costs £100,000 to repair. Under the average clause, your insurer would pay only two-thirds of that — £67,000 — leaving you £33,000 out of pocket, even though you've been paying premiums for years.
In a total loss scenario, the gap is even more stark.
How Often Should I Have an RCA Done?
The RICS recommends a full RCA every three years, or whenever you carry out significant works to the property. Between full assessments, most insurers will index-link the sum insured in line with published construction cost indices — but this isn't always accurate, particularly in periods of high inflation.
If you can't remember the last time your buildings insurance sum insured was professionally assessed, the answer is: it's time to get one done.
Contact Chiswick Surveyors to arrange a reinstatement cost assessment, or read more about our RCA services.
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James Hartley
Director and founding surveyor. Carries out reinstatement cost assessments for residential and commercial properties across West London.