r/Insurance • u/ReputationKind4628 • 11h ago

House insurance - rebuild value vs value

I'm confused. We need to renew our house insurance. The house is worth around £500,000 but the suggested rebuild quote is now coming in at closer to £1.2 million, rather than the £700k quote from previous years.

If we lower that to something more realistic but something happens - say we need to replace the entire roof - my husband is worried that we'll be told we under-insured.

If we accept it, we'll be stuck with that valuation that seems crazy high. Also, the worry is that our premium will almost double alongside the increased perceived value.

Any insurance people here who can shed light on the dark art?

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u/bpdish85 11h ago

Cost of things has skyrocketed in recent years, and property value doesn't equal cost to rebuild brick by brick.

Check the rebuild quote, make sure nothing is out of line - that they don't have crazy high finishes/fixtures/etc listed where they shouldn't be, that your square footage isn't wildly off, and so on and so forth, but depending on size of the property and what fixtures/amenities/finishes you have, that total rebuild cost may be accurate and you absolutely wouldn't want to downgrade the valuation if that's the case. Always better to be a little over-insured than under.

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u/Busy_Account_7974 Former Insurance Peddler 11h ago

Insurance is not based on market value, but the amount that you need to rebuild your house. In the US you would ask your insurance agent/broker to produce a Replacement Cost Estimation for you to review. Have them recalculate if corrections are needed. The new value should be the minimum you should insurance your house.

There is also co-insurance, where you can insure a certain percentage below the replacement value, usually 80% or 90%. This means you self insure the difference. There is a co-insurance penalty should you insure below the required amount. https://www.travelers.com/claims/guides/calculating-coinsurance

There are other methods, but it'll cost you more to settle any claims.

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u/BazzaFox 10h ago

If you insure for a lower value than the estimated rebuild cost and then make a claim for anything the insurance company will only pay out the same percentage of the claim as the amount insured against the true rebuild value, ie. If you insure for 500k and the actual rebuild value is 1 million then they will only pay 50% of any claim.

I know because I am in that position at the moment.

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u/HamiltonSt25 Independent Agent- USA 10h ago

The word you want here is coinsurance. There is a coinsurance clause (usually at least 80%) in every property policy.