Why rebuild costs keep climbing

Underinsurance, it’s a word we’re hearing often, and it’s not going away. According to Rebuild Cost Assessment, as of September 2025, only 7% of UK properties are correctly insured. The average underinsured property is covered for just 67% of its actual rebuild cost, up slightly from 63% in 2024¹. If your buildings are underinsured, in the event of a claim, you may not receive enough to cover the cost of the damage, or in some circumstances, receive nothing at all. And rebuild costs are still increasing, albeit not as quickly as they were five years ago.

Future Homes Standard

The Government’s new Future Home Standard is set to be fully implemented this year. Its aim is to make homes more energy efficient. Under the initiative if your home needs to be rebuilt, regardless of the cause, the property must meet the enhanced environmental and energy efficiency requirements. This includes high-performance insulation, low-carbon heating, specialist materials, improved ventilation and rooftop solar panels². This combined with a new mandatory 15-year warranty, means that rebuild costs will inevitably be driven upwards.

Building Safety Levy

The Government’s new Buildings Safety Levy (BSL) comes into effect in October 2026. This levy is part of a wider push to improve building safety and ensure developers contribute to the remediation of unsafe property defects, particularly relating to fire, such as unsafe cladding, following the Grenfell Tower tragedy.

While the fee targets developers, it will indirectly impact rebuild costs:

• If a building was partly or totally destroyed and rebuilt after 2026, the rebuild may need building control approval. That process could bring the levy into play, raising questions about the adequacy of the insurance policy’s building sum insured.
• Construction cost inflation: Developers are likely to factor the levy into project budgets. Over time, this will likely contribute to broader construction cost inflation, which will directly impact a rebuild valuation.

Increased labour costs

Post-pandemic, rising material costs drove up rebuild prices. Whilst these have stabilised, labour costs are climbing. The UK construction workforce is down by over 365,000 workers compared to 2008 ³, and a third of skilled tradespeople are set to retire within the next decade⁴. Fewer workers mean higher demand and higher prices.

Don’t forget alternative accommodation cover

With longer rebuild times likely, where will you live if your home becomes uninhabitable? Many of our policies cover all necessary and reasonable costs for alternative accommodation, ensuring you have a safe place to stay while repairs are underway. To explore this topic in more detail, see our article: The importance of alternative accommodation

How can Howden help?

We recommend reviewing your rebuild sum insured every three years. We can connect you with trusted surveyors, and in some cases, insurers can include this assessment as part of their policy package. To find out more read our article: Outdated rebuild costs and the importance of professional valuations.
Tailoring a policy to meet your needs is what we do best, so if you are concerned that your sum insured or policy cover are insufficient and want some advice, call us today on 020 8256 4901 or email privateclients@howdeninsurance.co.uk.

Sources
1. Rebuildcostassessment Infographic 2025: UK property insurance crisis revealed
2. Rebuildcostassessment. Energy efficient retrofits driving up rebuild costs
3. BCIS. Who’s responsible for training construction’s next generation?
4. BCIS How does labour availability impact reinstatement costs?