Is your home cover enough after the latest price and rebuild-cost shocks?

When house prices, construction costs, and repair bills are moving in different directions, it is easy to assume your home insurance will “probably be fine.” But for buildings cover, the key question is not what your home might sell for on the open market. It is what it would cost to rebuild it from the ground up if the worst happened.

That matters because a shortfall in your sum insured can create a problem even when the claim is only partial. If your cover is too low, the insurer may reduce the payout, leaving you to make up the difference. In a period of rising rebuild costs, that is a risk many UK homeowners may not realise they are carrying.

Why rebuild cost matters more than market value

The ABI is clear that buildings insurance should be based on rebuild cost, not market value. In simple terms, the rebuild cost is the amount needed to clear the site and reconstruct the home, while market value reflects what a buyer might pay for the property. Those numbers can be very different.

This difference often surprises homeowners. A flat or house may have a market value that is lower than its rebuild cost, especially once labour, materials, professional fees and site clearance are included. If you insure for the wrong figure, the policy may not provide enough protection when you need it most.

MoneyHelper also warns that if the sum insured is too low, an insurer may not pay the full amount of a claim even if the damage is partial. That is why “good” buildings cover should reflect the full rebuild cost, not just an estimate based on the local property market.

How much have rebuild costs been rising?

Recent data shows rebuild-cost inflation is still running above many people’s expectations. BCIS reported that its latest residential rebuild-cost models showed an average 3.8% uplift in rebuild costs for houses and flats in the year to January 2025. That is a meaningful increase for something that many households only review once a year.

The trend did not stop there. The ABI/BCIS House Rebuilding Cost Index was still rising in early 2026, with annual increases of 3.7% in January 2026, 3.9% in February 2026, and 3.8% in March 2026. Even if your policy is index-linked, those rises can still leave you needing a closer look at your cover.

Some building components have also increased faster than the average. BCIS said plumbing-related items such as hot and cold water installations rose by over 6% in its latest annual model update, while some timber-heavy components rose by only around 1%. That uneven pattern is a reminder that rebuild-cost changes are not always straightforward.

Can index-linking keep your cover on track?

Many domestic buildings policies are index-linked, which helps your sum insured move broadly in line with construction costs. BCIS says the House Rebuilding Cost Index is widely used between annual policy revisions, so it can provide a useful adjustment when insurers update cover automatically.

Even so, index-linking is not a substitute for checking the starting figure. If the original sum insured was too low, indexation may simply increase an underinsurance problem from one year to the next. In other words, a policy can be indexed and still be wrong.

That is why a proper rebuild-cost check remains important. Index-linking can help keep pace with inflation, but it cannot correct a home that was insured on the wrong basis in the first place. A fresh calculation is especially useful after any change to the property.

What counts in a proper rebuild-cost calculation?

Official guidance says rebuild cost should include much more than bricks and mortar. MoneyHelper and the ABI both say a good estimate should reflect the cost of labour, materials, professional fees and site clearance. If your calculation misses those items, your cover may come up short.

This is particularly relevant for homes with unusual features, extensions, loft conversions or non-standard materials. The more complex the property, the more likely it is that a rough guess will miss important costs. Even a well-kept home can be expensive to rebuild if it requires specialist work.

It is also worth remembering that professional fees may be substantial in a full rebuild. Surveyors, architects, engineers and planning-related costs can all form part of the total. The rebuild figure should reflect what it would take to restore the property properly, not just to re-erect the shell.

Why underinsurance can still hurt on a small claim

It is a common mistake to think underinsurance only matters in a total-loss scenario. MoneyHelper warns that if the sum insured is not enough to rebuild your home, the insurer might not pay the full amount of a claim, even if the damage is only partial. That can affect repairs after fires, floods, storms or other damage.

This matters because home claims are getting more expensive on average. The ABI said the average home insurance claim rose by 15% year-on-year in 2025, to about £6,000. When repair bills are already climbing, a shortfall in cover can be especially unwelcome.

The ABI also reported that insurers paid out £6.1 billion in property claims in 2025, the highest annual total on record, driven in part by adverse weather. With weather-related claims still a major factor, making sure your home cover is enough is not just a paperwork exercise.

When should homeowners review their rebuild cost?

The ABI advises homeowners to review rebuild cost at every renewal and after any renovations or extensions. That is sensible, because even relatively small changes can alter the amount it would take to rebuild the property. A new extension, conservatory or structural alteration may increase the rebuild figure more than you expect.

It is also wise to review cover after buying a property, remortgaging, or receiving new documents about the home. A mortgage valuation or deeds may contain a rebuild figure that can help as a starting point. However, those figures should still be checked carefully and updated if needed.

If you have not looked at your buildings cover for a few years, you may be relying on an outdated estimate. In a period of rising rebuild costs, “set and forget” insurance can leave gaps. A quick review at renewal can prevent a much bigger issue later.

How can you check whether your cover is enough?

There are free tools available to help homeowners assess whether their cover is adequate. MoneyHelper points people to the ABI rebuild calculator and other content calculators, which can give a more realistic rebuild estimate than a rough guess. These tools are especially useful if you are unsure where to start.

It can also help to compare the rebuild figure with the sum insured shown on your policy schedule. If the numbers are close, that is a good sign. If they are miles apart, it may be time to speak to your insurer or broker and update the policy details.

For added reassurance, keep a note of any improvements, building work or refurbishments. A record of extensions, new bathrooms, structural changes or roof work can make it easier to reassess rebuild cost accurately. The goal is to keep the policy aligned with the real rebuilding job, not the original purchase price.

Conclusion: a small check can prevent a big gap

Rising construction costs mean it is no longer safe to assume last year’s buildings cover will still be enough today. The ABI and BCIS data show rebuild costs have continued to rise, and some components have climbed faster than average. That makes a fresh check more important, not less.

If you remember only one thing, make it this: insure your home for rebuild cost, not market value. A quick review at renewal, and after any work that changes the property, can help you avoid being underinsured when it matters most. In a changing cost environment, that small step can make a big difference.