Self Build Insurance: Why You Need to Get Build Costs Right

There’s no doubt that self building is a fantastic way to create your dream bespoke home. Most self builders know the importance of insuring the construction phase of their projects – but when it comes to the finer details it can be difficult to know exactly what’s required.

The key to ensuring you can recover from a serious loss is to insure your project at its ‘professional reinstatement cost’. But what does this mean for your scheme?

The dangers of underinsurance

When you come to complete your insurance proposal form, your budget (in other words, the theoretical build cost) will be prevalent in your mind. After all, that’s the amount you’ve allocated to the project. But be wary of insuring your new build home for this sum without thinking hard about what would happen if you’re hit by a serious loss.

A much better route is to provide your insurance company with a professional reinstatement cost, which is what we ask for at Protek. Fundamentally, this would be the amount of money required to professionally reinstate the project using a main contractor, should it be destroyed (by fire, for example) two days prior to completion.

The reason for using this figure for your self build insurance is simple. If you insured on your expected build budget, this is likely to be a lot less than the cost of using a main contractor (after all, this is one of the attractions of self building). This means the insurance sum may not be enough to rebuild quickly from a major catastrophe.

This underinsurance problem doesn’t raise its head until after a catastrophic loss hits. Sadly, this can leave self builders without sufficient funds to get the property quickly and professionally rebuilt. Instead, you could find yourself faced with escalating costs and next to zero spare financial resources – meaning you’ll have to attempt the project again on a very limited budget.

This issue can be exacerbated when the project involves an existing building. A barn conversion will need cover for the professional reinstatement cost of any parts of the structure you retained, in addition to the new conversion works. These figures can be quite difficult to assess.

Should the worst happen, these factors can put a huge strain on self builders – but they are easily averted through professional assessment of the correct reinstatement cost.

Establishing the right reinstatement cost

The sum your project is insured for should be carefully considered to reflect the gross cost of professional labour and materials, together with fees for site clearance, debris removal and professional fees.

If you’ve opted for a turnkey route with a package supplier or building contractor, this will be a good indicator of an appropriate figure.

Alternatively, you could use the Royal Institute of Chartered Surveyors’ (RICS) rebuilding cost calculator. Before you use this tool, you’ll need to know your home’s external floor area for both upstairs and downstairs: this will give you the rebuilding cost per square metre.

There are limits to using the rebuild cost calculator as it doesn’t allow for every construction method, for instance.