Why rising rebuild costs are reshaping property cover and what to check before renewal

Rising rebuild costs are changing the way property cover needs to be assessed at renewal. For UK homeowners and businesses alike, the issue is no longer simply whether insurance is in place, but whether the amount insured is still enough to rebuild the property properly if the worst happens.

This matters because buildings insurance should be based on rebuild cost, not market value. As the ABI and BCIS both make clear, a figure that was accurate a few years ago may now leave a property underinsured, especially where labour, materials, professional fees, site clearance, or specialist construction methods are involved.

Why rebuild cost is becoming a bigger issue

Rebuild cost is the amount needed to completely rebuild a property from the ground up. The ABI says that means more than bricks and mortar: it includes labour, materials, professional fees, and the cost of clearing the site after a loss.

That figure has become more important as construction costs have continued to move. The ONS reported that UK construction output prices rose by 3.4% in the 12 months to December 2024, which helps explain why older sums insured can drift away from real-world rebuilding costs.

This is why a policy can look affordable and still be wrong in practice. The ABI noted that the average price of combined buildings and contents home insurance was £391 in Q2 2025, only £1 higher than a year earlier, but a stable premium does not remove the risk of being underinsured.

How underinsurance happens at renewal

Underinsurance often builds up quietly over time. A property may have been accurately valued when the policy started, but if inflation, building works, or changes to the property are not reflected at renewal, the insured amount can fall behind the true rebuild cost.

BCIS says index linking is useful, but it should not be the only safeguard. Its guidance recommends checking rebuilding cost regularly, at least every five years, rather than relying on automatic yearly increases for long periods without review.

That warning matters because renewal is often treated as a routine admin task. The FCA says renewal rules are intended to encourage customers to check cover and shop around, which makes renewal a natural point to pause and reassess whether the policy still matches the real risk.

What types of homes need extra attention

Some homes are more exposed to valuation errors than others. The ABI says non-standard homes, specialist architectural properties, and listed buildings should be assessed by a chartered surveyor rather than estimated using a standard calculator.

These properties can involve unusual materials, heritage requirements, or more complex rebuild methods. That means the cost of reinstating them can be materially higher than for a standard brick-built house, even if the market value seems modest.

Aviva Risk Management Solutions also highlights the importance of including external features in the review. Outbuildings, walls, driveways, gardens, and patios may all affect the rebuild figure and should not be overlooked when a policy is renewed.

What to check before renewal

The first check is simple: look at the current sum insured and ask whether it still reflects today’s rebuild cost. The ABI says the figure should be reviewed at every renewal, and it should be based on full reconstruction cost rather than the price you could sell the property for.

Next, check whether your policy auto-indexes the sum insured. BCIS says many domestic buildings policies are index linked, but that alone may not be enough if costs have moved faster than expected or if the property has changed since the last review.

It is also worth checking whether the policy includes all the relevant extras. The ABI says professional fees and site clearance should be built into the rebuild estimate, because they are often missed in quick valuations and can make a significant difference after a major loss.

Why renovations and extensions should trigger a review

Any work that changes the size, structure, or complexity of a home should lead to an immediate recalculation. The ABI specifically says homeowners should recalculate rebuild cost if they renovate or add an extension, then speak to their insurer to make sure they remain fully covered.

This is important because even seemingly straightforward changes can increase the cost of rebuilding. A larger floor area, a new roof design, specialist finishes, or additional rooms can all push the reinstatement cost above the old insured amount.

Waiting until the next renewal can leave a gap. If a claim happens before the policy is updated, the owner may be exposed to a shortfall that could have been avoided with a prompt review.

Why businesses need to review more than the building shell

For businesses, the renewal check should go beyond the property structure. Aviva Risk Management Solutions says renewal reviews should also consider plant, machinery, contents, stock, and business interruption periods, not just the building itself.

That is because rebuild delays can affect operations long after the physical damage is repaired. If reinstatement takes longer than expected, the original business interruption cover period may no longer be long enough to support recovery.

The ABI’s claims data shows why this matters. Insurers paid £1.6 billion in property claims in Q2 2025, with average claims of £6,200 for households and £17,400 for businesses, which underlines the financial impact of getting cover and sums insured wrong.

Practical tools that can help before renewal

There are now free tools designed to support a better renewal check. The ABI public rebuilding-cost calculator is free, can be used four times in any 12-month period, and is intended to help policyholders check whether buildings insurance still covers the rebuild cost.

BCIS also offers a public residential rebuilding calculator and says it is the principal source of residential rebuilding cost information in the UK. For standard homes, this can be a helpful starting point when reviewing a renewal offer.

For more complex properties, however, a calculator may only be a first step. RICS says a reinstatement cost assessment should not simply rely on a standard m² rate, historic jobs, a previous policy, or BCIS data alone, which supports a more detailed valuation where needed.

Why accuracy matters financially

Getting the rebuild figure wrong can have direct claim consequences. RICS says it is reasonable to expect insurers to refuse claims when the declared rebuild value is incorrect, which makes an accurate renewal figure essential rather than optional.

There is also a wider market concern about the protection gap created by outdated values. Aviva Risk Management Solutions warns that incorrect building values can leave property underinsured, and that businesses may also be underinsured on business interruption if rebuild times have lengthened.

The direction of travel in the market is clear. The ABI’s 2026 SME insurance work says many SMEs are uninsured or underinsured and calls for better renewal processes so that renewal on current terms is not the default. That message is just as relevant to homeowners who have not reviewed cover in several years.

Rising rebuild costs are not just a technical insurance issue; they affect whether cover will do its job when it is needed most. A policy that looked suitable in the past can become too thin if rebuilding assumptions are left unchanged.

Before renewal, take time to check the sum insured, the rebuild assumptions, and whether recent changes to the property have been captured. If your home is non-standard, listed, or has specialist features, a chartered surveyor’s assessment may be the safest way to avoid underinsurance and renew with confidence.