Compare commercial building insurance the right way
- RebuildCostASSESSMENT.com
- 1 day ago
- 7 min read
If you’re in the middle of comparing quotes for commercial building insurance – whether it’s for a renewal or a newly acquired property – you’ve likely hit a common roadblock: the “rebuild cost” or “sum insured.” It’s the one number that can have a big impact on your premium and determines whether your insurer pays out in full if the worst were to happen.
This guide explains why getting that figure right is the most important part of the process. Then, we’ll walk you through how to compare policies properly and choose the one that actually provides the cover that you need.
Read on to find out how to get your insurance coverage right.
Why your property's market value is NOT its rebuild cost
When setting the sum insured on your commercial property insurance policy, assuming the market value of your property will suffice could be a very costly mistake. The rebuild cost is what should be used, and there is a difference.
Market value is what a buyer would pay for your property today, taking into account location, demand, and future income potential.
Rebuild cost, on the other hand, is what it would cost to demolish and rebuild your property completely to its current specification – and it’s the number insurers actually use.
We go into more detail here in our blog: Market value vs rebuild cost
According to the Royal Institution of Chartered Surveyors (RICS) and the Association of British Insurers (ABI), the rebuild cost should include:
Labour and construction materials
Demolition and site clearance
Professional fees (architects, engineers, surveyors)
Compliance with current building regulations
Insuring your property based on its £500,000 market value when its true rebuild cost is £700,000 leaves a catastrophic £200,000 gap in your cover.
You’re out of pocket if you overinsure too. For example, a retail unit in a city centre might be worth £1.2 million on the open market, yet cost only £800,000 to rebuild. Insure it based on the higher figure, and you could be overpaying for years.
Now you know the difference, let's look at what happens if you get this number wrong.
What is the average clause — and why could it cost you thousands?
The average clause is something that most policyholders aren’t even aware of until it’s too late.
Put simply, it allows insurers to reduce your payout if you’re underinsured – even if you’re making a smaller claim, say for accidental damage to the office kitchen worktop. If the rebuild cost you declare is lower than the true value, your insurer can apply the same percentage reduction to any claim you make.
As Sharon Masters, Surveyor and Technical Lead at RebuildCostASSESSMENT.com, puts it: "Most landlords only learn about the average clause after it's too late. It penalises even partial claims — and it all comes down to the declared rebuild cost."
How the average clause works
True Rebuild Cost: £1,000,000
Your Declared Sum Insured: £750,000 (you are 25% underinsured)
Damage Caused by Fire: £200,000
Your insurer applies the average clause and only pays 75% of the claim: £150,000
You cover the remaining £50,000 out of pocket.
This isn’t a rare clause tucked into obscure policies — it’s a standard condition across most commercial building insurance contracts.
The average clause is the single biggest financial risk for commercial landlords, and it's triggered by one thing: getting your rebuild cost wrong.
So how do you avoid this trap? By getting a professional valuation.
Want to dive a little deeper? We go into more detail on the average clause, including the formula, in our blog ‘What is the average clause in insurance?’
Why rebuild cost calculators often miss the mark
Online rebuild cost calculators may seem like a quick fix – but they’re no substitute for a professional valuation. These tools rely on generic assumptions and average cost rates. They don’t account for the specific materials, layout, condition, or complexities of your building.
This can leave you significantly underinsured or overpaying for cover you don’t need.
As we explain in our guide to commercial rebuild cost calculators, even small errors in your input can lead to large differences in the sum insured, and that could trigger the average clause when you claim.
If you're relying on a calculator, you're still guessing. A rebuild cost assessment takes the guesswork out of the process.
How to get the right number: Your guide to a Rebuild Cost Assessment (RCA)
Instead of guesstimating, a Rebuild Cost Assessment (RCA) gives you a definitive, evidence-backed figure that removes all doubt from your insurance application.
An RCA from RebuildCostASSESSMENT.com gives you a clear, expert calculation of what it would cost to rebuild your commercial property. The report is prepared by a qualified surveyor, and we are regulated by RICS – the Royal Institution of Chartered Surveyors. This means you can trust the figure to be accurate, up to date, and accepted by insurers.
How does it work?
Our assessments are expert-led and designed to give you an accurate valuation – all without the need for a site visit in most cases. Here's how we do it:
Step 1: We receive your order via our website or through a broker or managing agent. Our survey process team logs the details and prepares it for assessment.
Step 2: Our assessors gather detailed property data using tools like planning portals, Zoopla, and Rightmove to confirm floor plans, site layout, and listing status.
Step 3: We measure the property using satellite imagery and mapping platforms, always verified using at least two sources for accuracy.
Step 4: Our quality control team applies rebuild rates using trusted data from BCIS (the Building Cost Information Service), alongside in-house expertise, to produce a reliable, insurer-ready valuation.
Step 5: You receive a formal, RICS-regulated report — clear, certified, and ready to use with any insurer or broker.
For more complex or listed buildings, we also offer site surveys, ensuring every property type can be assessed to the right standard.
Want to see how it works behind the scenes? Watch our video:
Why it matters:
Avoids the risk of underinsurance and the average clause
Prevents overpaying for inflated premiums
Provides peace of mind backed by expert insight
Accepted by insurers and brokers across the UK
When it comes to commercial property insurance, confidence starts with the right figure.
Get your desktop assessment from RebuildCostASSESSMENT.com and secure proper protection today.
Now you have your RCA: How to compare commercial property insurance policies
Armed with your accurate Rebuild Cost Assessment, you can now approach any insurer, broker, or comparison site with confidence. But how do you choose the right policy? This step-by-step guide will help you navigate the options and ask the right questions, so you can secure the cover your property really needs.
What should you look for in a commercial building insurance policy?
Core policy features (typically standard)
Buildings insurance (sum insured accuracy)
Your policy must reflect the rebuild cost provided in your assessment. This ensures full coverage and protects against under and over insurance.
Property owners’ liability
Covers legal claims if someone is injured on or near your premises.
Business interruption / loss of rent
Covers lost income if your building becomes unusable after damage. Choose an indemnity period that reflects realistic rebuilding times – typically 12 to 36 months.
Employers’ liability
Legally required if you employ staff – covers injury or illness claims.
Contents insurance
Protects items such as furniture, fixtures, and stock – especially important for furnished or managed properties.
Optional Add-Ons (may not be included by default)
Accidental damage
Covers non-deliberate damage like broken glass, internal leaks, or maintenance mishaps.
Malicious damage by tenants
Important for landlords with higher tenant turnover or past issues.
Subsidence, heave and landslip
Essential for properties in areas with shifting ground or clay soils – check if excluded by default.
Theft and vandalism
Some policies exclude damage not linked to break-ins – ensure both are covered.
Cover for unoccupied property
If your building may be empty for more than 30 days, you’ll likely need additional protection and specific security measures.
Flat roof warranty
Properties with flat roofing may require regular inspections – check for related clauses.
Legal expenses cover
Optional, but useful for handling disputes with tenants, contractors, or third parties.
Key questions to ask any insurance provider
Before choosing a policy, ask the following to ensure it meets your needs:
Does this policy cover the full rebuild cost as assessed by my report?
What is the excess on each type of claim — buildings, contents, liability, etc.?
Are features like accidental damage and malicious damage by tenants included, or do they cost extra?
Is subsidence cover included, and if not, can it be added?
What are the policy conditions for unoccupied buildings?
Are there any warranties or inspection requirements for flat roofs or older properties?
How do you handle claims – what is the process and average turnaround time?
Are there any exclusions or limits I should be aware of?
Can this policy be tailored to suit my specific type of business or tenant mix?
What documentation do you need to validate my sum insured figure?
By using your certified rebuild cost assessment and following this guide, you take control of the insurance process and protect your investment with confidence.
The foundation of your commercial property's protection
Protecting your commercial property starts not with a quote, but with a number. Throughout this guide, you've learned how comparing insurance without knowing your rebuild cost can expose you to serious financial risk — and how even the best commercial building insurance is only as strong as the figure it’s built on.
A rebuild cost assessment from RICS-regulated RebuildCostASSESSMENT.com is not an optional extra. It’s the foundation that ensures your policy pays out in full, avoids hidden traps like the average clause, and gives you true peace of mind.
Gain peace of mind with an assessment from RebuildCostASSESSMENT.com today.
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Important disclaimer: The information provided here is for general informational purposes only and is not intended as professional advice. While we strive to ensure all information is accurate and up-to-date, the content may not reflect the most current legal or regulatory developments, standards, or practices. No representations or warranties are made (express or implied) about the accuracy of the information provided, and reliance on this information is strictly at your own risk.
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