Rebuild cost vs. market value

Understanding the difference can save you money and hassle.

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Rebuild cost vs. market value

Picture this: Sarah, a homeowner in a quiet town in the west of Ireland, thought she had done everything right when she took out home insurance six months ago. She insured her home for its market value (what she believed it was worth if she ever sold it). But when a named storm caused major damage, she discovered her payout didn’t come close to covering the repair costs. The issue? Her home’s market value was far lower than what it would actually cost to rebuild.

Stories like Sarah’s are common. Many homeowners don’t realise there’s a big difference between market value and rebuild cost, and only one should guide your insurance cover.

What’s the difference?

What is rebuild cost?

The rebuild cost is the amount it would take to completely rebuild the physical structure of your home from scratch if it was destroyed by an insured event like a fire or flood, storm damage, subsidence, or an escape of water from a burst pipe.

It includes:

  • Construction materials

  • Labour costs

  • Demolition and site clearance

  • Professional fees (architects, engineers, surveyors, solicitors)

  • Rebuilding outbuildings, garages, and boundary walls

It does not include the value of the land or any market related influences.

How do I calculate my rebuild cost?

To estimate your rebuild cost, insurers typically ask for details such as:

  • Location of the property

  • Number of rooms

  • Year of construction

  • Roof and wall type

  • Presence of garages, outhouses, or car parking spaces

A helpful starting point is to use the House Rebuild Calculator by the Society of Chartered Surveyors Ireland (SCSI). It uses industry standard data to give you a guideline estimate of you rebuild cost.

Please note: Bank of Ireland and Bank of Ireland Insurance Services is not responsible for the information on third party websites.

However, for complete confidence that your home is adequately insured, you can hire an independent chartered surveyor. They can provide a precise rebuild cost assessment tailored to your property’s unique characteristics, which is especially useful if:

  • Your home is older or listed

  • You’ve carried out extensions or renovations

  • Your property has unusual features

  • You want to avoid any risk of underinsurance

A professional valuation will also factor in the cost of professional services, such as architects or solicitors, which are often overlooked.

What is market value?

In contrast to the rebuild cost, the market value is the price your home would likely achieve if it was sold. It’s influenced by:

  • Location

  • Local property demand

  • Nearby amenities and school catchment areas

  • Economic conditions

  • Land value

Market value can be higher or lower than the rebuild cost, depending on where you live. In rural areas, the market value may be lower than the rebuild cost. While in cities or high demand areas, the market value may be much higher than the rebuild cost. This is why market value should never be used to determine how much you insure your home for.

Why is home insurance based on rebuild cost?

If you insure your home based on its market value:

  • You may be overinsured - if the market value is higher than the rebuild cost, you’ll pay unnecessarily high premiums.

  • You may be underinsured - if the market value is lower than the rebuild cost, your insurer may apply the average clause, meaning you only receive a proportion of your claim. This can leave you significantly out of pocket.

In summary

Ensuring your home is properly insured starts with understanding the difference between rebuild cost and market value. Only the rebuild cost reflects what it would take to restore your home after serious damage, and using the wrong figure can leave you financially vulnerable.

So, use tools like the SCSI House Rebuild Calculator and seeking professional advice (where needed), to help make sure your home is protected with the right level of cover.

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Discount applies to new policies and for the first year only. Only one discount code can be used per purchase.

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  1. 20% home insurance discount is available to Bank of Ireland mortgage customers with a Building Energy Rating (BER) of A or B when you use code ‘ENERGY’. Offer available until 30 September 2026.

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