Ask someone what their house is worth and they will tell you what it would sell for. Ask what it is insured for and, often enough, you get the same number. They are not the same number, and buildings insurance only cares about one of them.

What the price of a home actually includes

The price of a house includes the ground it stands on. Two identical houses, built to the same specification by the same builder in the same year, will sell for very different amounts if one is in a town and the other is a long way from anywhere. The difference is the land, and the land is not what insurance is for.

Insurance has no interest in the ground. If the house burns down, the ground is still there. What the insurer has to do is put the building back — clear the site, obtain the permissions, pay the architect and the surveyor, and build the thing again. That figure is the rebuild cost, and it is the number a buildings policy is set to.

So the two figures answer different questions. Market value asks what someone would pay for the house and the plot together. Rebuild cost asks what it would take to reconstruct the house alone. They can land close together, and they can land a long way apart in either direction.

Which way the gap runs

There is no reliable rule that one is always higher.

In an expensive area, a modest house can sell for a great deal more than it would cost to rebuild, because the land, rather than the building, is carrying the price. Insure that house for its market value and you are paying for cover you cannot use.

In a cheap area, or where the building itself is unusual, the rebuild figure can be the larger one. A listed building has to be put back using the materials and methods it was built with, which is a different job from building a modern house of the same size. A thatched roof, lime mortar, hand-made bricks, sash windows made to match — these are specialist trades, and the cost reflects that rather than what the house would fetch on the open market.

This is why "insure it for what I paid" is not a shortcut. It is a different question with a different answer.

Working the figure out

For a standard house — ordinary construction, no listing, nothing unusual about it — you can get free general guidance from the BCIS rebuilding cost calculator, which the Association of British Insurers commissions. It asks you to register, and it allows three calculations in a twelve-month period. It is deliberately a broad estimate, and the service says plainly that it supports professional advice rather than replacing it.

You will need the internal floor area, the number of storeys, and what the house is built from. A survey report or the original sale particulars usually have all three.

Where the calculator is the wrong tool, a surveyor's rebuild cost assessment is the right one. That applies to a listed building, to non-standard construction — timber frame, thatch, solid walls, a flat roof, concrete — and to any house that has been substantially altered or extended, because the calculator is working from a general pattern your house no longer fits.

BCIS rebuilding cost calculator: abi.bcis.co.uk — checked October 2026.

What happens if the figure is too low

If the sum insured is lower than it should be, the insurer may reduce a claim in proportion to the shortfall.

The part people miss is that this is not only a total-loss problem. It applies to partial claims too. A kitchen fire that damages one room can be settled at less than the cost of putting that room right, because the proportion is worked out against the whole sum insured rather than against the part of the house that burned. You do not have to lose the house to feel it.

The remedy is unglamorous and doesn't take long. Check the figure at renewal rather than letting it roll forward untouched, and tell the insurer when you extend, convert a loft, or re-fit a kitchen or bathroom — because each of those changes what it would cost to put the building back.

Where this sits with your mortgage

Your lender will usually require buildings insurance, but you're free to choose any insurer. You don't have to arrange it through us. Contents and landlord cover are your choice.

What the lender cares about is that the building — its security — is adequately insured. That is usually expressed as a requirement that the sum insured is at least the rebuild cost, which is precisely the figure this article is about. The exact wording is in your mortgage offer.

The short version

- Market value includes the land. Rebuild cost does not. - Neither figure is reliably higher than the other; it depends on where the house is and what it is made of. - A general calculator suits a standard house. A listed or unusual one needs a surveyor. - Too low a figure can reduce a partial claim, not only a total loss. - Check it when you renew, and tell the insurer when the building changes.

If you change your mind about a new home insurance policy, you can cancel it within 14 days, without penalty and without giving a reason. The period runs from the day the contract is concluded, or from the day you receive the policy terms and the pre-contractual information, whichever is later. FCA Handbook ICOBS 7.1.1R and 7.1.5R — checked October 2026.

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Read next: the rebuild cost explainer on our buildings and contents insurance page, which shows the shape of the difference as a drawing, or go straight to how do I work out the rebuild cost? and what happens if I'm under-insured?

There is no fee for the advice. We are paid by commission from the insurer.