Does Building Insurance Cover Full Rebuild Cost?

Building insurance is designed to cover the full cost of rebuilding your home if the worst happens. Not what it would sell for on the market. What it would actually cost to put back together. Getting that figure right matters more than most people realise, and with Lemonade, unlimited rebuild cover means you’re not left guessing at a sum insured. Here’s what you need to know.

What is rebuild cost in building insurance?

Rebuild cost is the amount it would take to rebuild your home from scratch if it were completely destroyed. That means everything: laying the foundations, going back up to the roof, finishing the fixtures. It’s not the same as what your home would sell for.

Market value accounts for your location, the land, and what buyers are willing to pay. Rebuild cost is only concerned with the physical structure and everything it takes to restore it. In some areas, rebuild cost is lower than market value. For specialist properties, it can work the other way.

Getting this figure right matters. Underestimate it, and you could end up significantly out of pocket when you claim.

What does rebuild cost actually include?

When insurers talk about rebuild cost, they mean more than just bricks and mortar. Here’s what a full rebuild typically covers:

What’s included	What it covers
Labour and materials	The cost of skilled tradespeople and all construction materials
Demolition and site clearance	Clearing the site before rebuilding can begin
Architect and surveyor fees	Professional fees for planning and overseeing the rebuild
Debris removal	Clearing rubble and waste from the site
Temporary accommodation	A place to stay while your home is being rebuilt

Some policies cap the amount they’ll pay out, which is why getting your sum insured right matters. With Lemonade, rebuild cost cover is unlimited, insuring you for whatever it takes to restore your home after events like fire, subsidence, or storm damage.

Rebuild cost vs market value: what’s the difference?

These two figures are often confused, and it’s an easy mistake to make.

	Rebuild cost	Market value
What it measures	Cost to physically reconstruct your home	What a buyer would pay for your home today
Includes land value	No	Yes
Includes location premium	No	Yes
Used for	Setting your building insurance sum insured	Buying, selling, or remortgaging
Can be higher or lower	Higher for listed or specialist properties	Higher in desirable locations

Insuring for the wrong figure can leave you either underinsured or paying more than you need to.

How to calculate your rebuild cost

You’ve got a couple of options here.

Method	Best for	Cost	Accuracy
BCIS rebuild cost calculator	Most standard properties	Free or low cost	Good ballpark figure
Professional RICS survey	Listed, non-standard, or high-value homes	Higher upfront cost	Most accurate

The BCIS (Building Cost Information Service) calculator is developed by the Royal Institution of Chartered Surveyors (RICS) and estimates rebuild costs based on your property details and postcode. It’s a solid starting point for most homes.

A professional RICS survey goes further. A surveyor inspects your home in detail, factoring in extensions, loft conversions, and construction type. If your property is unusual in any way, this is the more reliable route.

Either way, if you’ve renovated or extended since you last checked, it’s worth recalculating. And if you’re planning any works, notify Lemonade before they begin so your cover stays in place throughout.

Avoiding underinsurance and the average clause

Underinsurance happens when the sum insured on your policy is less than the actual cost of rebuilding your home. If you need to make a claim, your insurer may apply what’s known as the average clause, reducing your payout proportionally.

Here’s how that plays out in practice:

Scenario	Rebuild cost	Sum insured	Payout on a £100,000 claim
Fully insured	£200,000	£200,000	£100,000
Underinsured by 25%	£200,000	£150,000	£75,000
Underinsured by 50%	£200,000	£100,000	£50,000

That gap can be significant. Index-linked building insurance automatically adjusts your sum insured in line with inflation in construction costs, which helps. But it’s still worth checking your cover annually, particularly if building costs in your area have risen sharply.

With Lemonade, unlimited rebuild cover means you won’t be caught out by underinsuring your home’s structure. That said, if you carry out works without notifying us first, your cover could be affected. If that happens, you may need to cancel your policy and requote with your updated property details.

Special cases: listed buildings and non-standard constructions

For properties with unusual construction, rebuild costs can be significantly higher than for a standard home. Here’s a quick overview:

Property type	Why rebuild costs are higher	What to do
Listed buildings	Specialist materials and conservation requirements	Get a RICS survey and listed building insurance
Thatched roofs	Specialist roofing materials and skilled tradespeople	Flag with your insurer at point of quote
Non-standard construction	Unusual materials like timber frame, concrete, or steel	Non-standard construction insurance may be needed
Properties with extensions	Additional square footage increases rebuild cost	Recalculate after any work is completed

A standard calculator may not give you an accurate figure for these properties. A professional RICS survey is worth the investment, and make sure your insurer has the full picture when you take out or renew your policy.

Planning a renovation? Here’s what you need to do

If you’re planning any building works to your property, whether that’s an extension, a loft conversion, a new kitchen, or any other significant renovation, you need to notify Lemonade before the works begin. This gives us the chance to confirm whether your current cover is sufficient for the duration of the project.

Here’s why it matters:

• Your cover could be affected mid-works. Building projects change the risk profile of your property. Notifying us upfront means we can make sure you’re properly covered throughout.
• You can’t adjust your rebuild cost mid-term. With Lemonade, rebuild cost is listed as unlimited, so there’s no figure to update during your policy term. But your property details still need to reflect what’s actually there.
• Works carried out without notification could leave you unprotected. If something goes wrong during or after unnotified works, your cover may not apply. In that case, you may need to cancel your policy and requote with your updated property details.

The simplest approach? Contact Lemonade before anything starts. It takes minutes and could save a lot of headaches later.

When to update your buildings insurance

It’s easy to set your policy and forget it. But certain things should always prompt a review:

Trigger	Why it matters
Renovation or extension completed	Increases the rebuild cost and square footage
Moved into a listed or non-standard property	Specialist rebuild costs apply
Building costs rising in your area	Your sum insured may no longer reflect real costs
Policy not index-linked	Figures can become outdated quickly

Your property details, square footage, construction type, year built, feed directly into your rebuild cost. Keep them accurate and notify Lemonade of any changes via the app.

How to make a claim

If the worst happens and you need to make a claim, here’s how to handle it:

1. Check your policy first. Make sure the damage is covered before you do anything else.
2. Document everything. Photos, receipts, surveyor reports: the more evidence, the better.
3. Report it quickly. Contact your insurer as soon as you can. Delays can affect your claim.
4. Hold off on permanent repairs. Wait for your insurer’s go-ahead before getting work done, unless it’s urgent to prevent further damage.
5. File via the Lemonade app. No phone queues, no forms to dig out. Just a few taps, and you’re on your way to getting things sorted.

Bottom line

Getting your rebuild cost right is one of the most important things you can do as a homeowner. It’s not about what your home is worth on the market. It’s about what it would actually cost to put it back together.

With Lemonade, unlimited rebuild cover means you’re not left trying to second-guess that figure. Keep your policy details up to date, notify us before any planned works begin, and recalculate after any changes to your home. Explore Lemonade’s home insurance options to find the right cover for you.

Full rebuild cost FAQs