top of page

On average, our desktop rebuild cost assessment reports are currently taking 5 working days.
Please keep checking back for status updates.

  • Writer's

Understanding Rebuild Cost vs Market Value

Updated: May 4

Insurance can often feel like a bit of a puzzle. All the legal jargon and complicated rules can make it seem like you need a law degree just to understand it. Getting to grips with the difference between rebuild cost vs market value can also be tricky. But we're here to help. In this blog post, we'll unravel these important concepts and show you why they matter when it comes to your insurance.

A vibrant UK street scene transitioning from day on the left to dusk on the right, showing terraced houses with one building under construction, illustrating the concept of rebuild cost versus market value.

Rebuild Cost vs Market Value

The difference between market value and reinstatement value (or rebuild cost, as it’s also known) are really important, especially when it comes to insurance.

  • Market Value: This is like the price tag your property would have if you wanted to sell it today. It considers factors like location, demand, and neighbourhood. It's what someone would pay for your property in today's real estate market.

  • Rebuild Cost: This is the amount of money you'd need to completely rebuild your property if it was destroyed. It covers everything, including the cost of materials, professionals like architects and chartered surveyors, and removing the remains of your old property. It's like starting over, rebuilding your home or commercial property from the ground up.

For a quick explanation, you can watch our "Ask Amy" video below, and for more details, just keep scrolling.

Why is Reinstatement Cost Often Lower than Market Value?

Now, you might be wondering, why is the rebuild cost often lower than the market value? It's a great question. Several things contribute to the rebuild cost being lower than the market value:

  • Regional Variations: Consider where your property is located. Regions like London and the South East often have pricier properties than the North. When it comes to insurance, this means that in high-value areas, the cost to rebuild your property may be less than its market value. That’s because rebuild cost focuses on the structure itself, while market value factors in location and demand. So, depending on where you are, the reinstatement cost could be lower compared to the market value.

  • Special Features: Sometimes, the market value of a property includes extra bells and whistles, like a landscaped garden or a popular location. Rebuilding your property from scratch doesn't necessarily mean replicating all these features, which can bring the cost down.

  • Land Value: The market value includes the price of the land your property sits on, which can be a significant portion of the overall value. In contrast, the rebuild cost focuses on constructing the building itself.

Although many people assume that insuring their properties for the market value is enough, that’s often not the case. That’s why it’s so important to understand the difference between market value and reinstatement cost.

A split view of a UK property insurance scenario showing a commercial property intact on the left and damaged by fire on the right, emphasising the importance of updated rebuild cost assessments.

Can Reinstatement Cost Be Higher Than Market Value?

Reinstatement cost can be higher than market value in some situations, like:

  1. Listed Properties: Historic or listed properties often require very careful restoration using specialised materials and craftsmanship. These unique requirements can drive up the reinstatement cost beyond the market value.

  2. Lower Than Average Housing Prices: In regions where property market values are relatively low, but construction costs, materials, or labour expenses remain high, the reinstatement cost may be higher than the market value.

  3. Unique Architectural Features: Properties with distinctive or intricate architectural features may incur higher reinstatement costs due to the need for specialised artisans and materials to recreate those features.

  4. Rare or Expensive Materials: If your property incorporates rare or expensive building materials, such as imported stone or antique wood, replacing these can significantly increase the reinstatement cost.

In these kinds of cases, having an accurate rebuild cost assessment becomes even more critical to ensure your insurance coverage adequately protects your property, even when the reinstatement cost exceeds its market value.

Impact on Insurance Premiums and Coverage

When you insure your property, the value you choose to insure it for (insurance reinstatement value vs market value) directly affects your insurance premiums and coverage.

Here's how it works:

  • Insuring for Market Value: Opting to insure your property for its market value could actually result in lower insurance premiums. However, there's a catch. If a disaster occurs, your insurance payout may only cover a portion of the rebuilding cost, potentially leaving you with a significant financial burden.

  • Insuring for Rebuild Cost: Choosing to insure your property for the rebuild cost ensures that you'll receive adequate coverage in case of damage or loss. While your premiums might be slightly higher, you'll have peace of mind knowing that your insurance will fully cover the cost of rebuilding, even if it exceeds the market value.

So, it's a bit of a trade-off. Lower premiums with potential coverage gaps versus slightly higher premiums with comprehensive coverage.

Why Accuracy Matters When It Comes to Market Value vs Rebuild Cost

Imagine you've insured your property for an amount significantly lower than its rebuild cost. A disaster strikes, and the damages are extensive. Suddenly, you're faced with the grim reality that your insurance payout won't cover the full cost of rebuilding. We discussed this in our recent blog, “What is The Average Clause in Insurance?”

On the flip side, suppose you've accurately assessed your property's rebuild cost. In that case, you can rest easy, knowing that your insurance will provide the necessary funds to rebuild your home or commercial property, regardless of whether it exceeds the market value. Accurate rebuild cost assessments act as a safety net, protecting you from financial setbacks if the worst were to happen.

You might also be interested in our blog about how long a Rebuild Cost Assessment is valid for.

A content property owner stands in front of a UK commercial property, holding a tablet that reflects an accurate rebuild cost assessment, symbolising well-maintained insurance coverage.


As a responsible property owner, the next step is clear: get an accurate rebuild cost assessment. This assessment will be your guiding light in choosing the right insurance coverage. It's a proactive investment that makes sure you're adequately protected, providing peace of mind and financial security for you and your property.

So, don't delay. Reach out to experts in rebuild cost assessment today and take the necessary steps to safeguard your most valuable asset. Your property and your future self will thank you for it.

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.

We do not offer financial advice and nothing within this content should be construed as such. We recommend consulting with a qualified professional who can provide tailored advice based on your individual circumstances before making any decisions related to insurance.

Please note that we are not regulated by the Financial Conduct Authority (FCA) and as such, are not qualified to provide specific financial or insurance advice. Please see our footer for further information about us, including our website terms of use, privacy policy and more.


bottom of page