Rebuild cost, not market value.
The building sum insured is the most the insurer will pay to rebuild your house. So it should match what a builder would charge to clear the site and put the same house back, with the same materials and finishes, and with the fees and the council’s requirements paid for.
What the house would sell for doesn’t come into it. Market value includes the land and the street, and one home wording on our panel says so directly: “the replacement value of a Building is not the same as its market value and You do not need to include the value of the land.”
On an ordinary house, the gap between those two numbers is forgiving. On a large or unusual one, it’s where people end up underinsured.
Six things a rebuild actually costs.
- Clearing the site: demolishing what’s left and taking the debris away.
- Professional fees: architects, engineers, surveyors and the building certifier.
- Today’s building rules: energy, bushfire, access and structural standards that didn’t exist when the house was built.
- The house itself: floor area times a building rate, then lifted for your stone, joinery, glazing and fittings.
- Everything outside: the pool, fences, retaining walls, paved driveways and landscaping, which the wordings we read count as part of the home.
- GST: one wording asks that the sum insured include it, because the builder’s invoice will.
Some policies pay the first three on top of the sum insured, and some pay them out of it. The table below shows how three policies treat each one.
A public-record estimate doesn’t see your finishes.
When you enter an address in our quote form, we look the house up in public records and show a rebuild range under the building question. The estimate is built from the floor area and a standard building rate.
Across the houses looked up through our form so far, the range ran from about 60% to 120% of the central estimate. For the Victorian houses among them, the central estimate worked out at roughly $3,400 to $4,300 per square metre.
That’s a sound starting point for a standard build. It can’t know about imported stone, a steel-framed glass wall, custom joinery or a difficult sloping site. For a house like that, a quantity surveyor’s report is the figure commonly relied on. One wording points to the Insurance Council of Australia’s rebuild calculators as a first check.
What the policy pays beyond the sum insured.
None of the three home wordings we read has an 80% or “average” clause, so a shortfall isn’t cut further in proportion. The sum insured is still the ceiling, though, and these are the amounts each one adds on top of it, or takes from inside it.
| Policy A | Policy B | Policy C | |
|---|---|---|---|
| Safety net | Up to 30% more, total loss only, if building costs surged after a catastrophe or you used its calculator correctly | Up to 10% more on any accepted building claim | Up to 25% more, if reasonable steps were taken to estimate the rebuild cost |
| Demolition and debris | Inside the sum insured | On top, up to 20% of the sum insured | Inside the sum insured |
| Professional fees | Inside the sum insured | On top, up to 10% | Not stated |
| Today’s building rules | Inside the sum insured | On top, up to $50,000 a year | On top, up to 20% of the sum insured |
| Living elsewhere | On top, the higher of $20,000 or 20% | On top, 20%, up to 24 months | On top, 20%, up to 24 months |
| Indexation | 0.5% a month during the year | At renewal | At renewal |
Two things stand out. First, where demolition and fees come out of the sum insured, the figure has to be big enough to carry them as well as the build. Second, every safety net has conditions. They catch a reasonable estimate that turns out short, not a figure nobody checked.
When to look at the number again.
After a renovation or extension. One wording makes it a condition: if you make the house bigger or better, you update the sum insured. Large works also need telling the insurer before they start. Thresholds in the wordings we read were $75,000 and $150,000, and one excludes any work on the roof, external walls or structure.
At every renewal. Indexation follows general building costs, not your suburb or your builder. One wording says it plainly: “It remains Your responsibility to ensure the indexed sum insured remains appropriate.”
After a disaster nearby. Building costs commonly jump in a region after a flood or bushfire, which is exactly when everyone needs a builder.
See the range before you choose a figure.
Enter the address and you’ll see the public-record rebuild range under the building question, then choose your own figure. Larger homes go to the insurers who write them, and a broker can talk the figure through with you. Luxury home insurance, mansion insurance and heritage homes have more.
Rebuild cost FAQs
Is the sum insured the same as what my house would sell for?
No. The sum insured is the cost to rebuild the house. Market value includes the land and the location, and can be well above or below the rebuild cost. One home wording on our panel puts it plainly: the replacement value of a building is not the same as its market value, and you don’t need to include the value of the land.
Should the sum insured include GST?
Yes, in the wordings we’ve read. One says the sum insured values you choose should include GST, because a builder’s quote will.
What happens if I insure for too little?
In the three home wordings we read, there’s no 80% or average clause. The insurer pays up to the sum insured, plus any safety net the policy offers, and you carry the rest. The safety nets range from 10% to 30% over the sum insured, each on its own conditions.
Do I need a quantity surveyor’s estimate?
For a large, one-off or architect-designed house, it’s commonly worth it. Online calculators and public-record estimates work from floor area and a standard building rate, and they don’t see your finishes, your site or your joinery.
Are the pool, fences and driveway part of the building sum insured?
Generally yes. The wordings we read count in-ground pools, fences, retaining walls, paved driveways and landscaping as part of the home, so they belong in the rebuild figure. Some carry their own fixed limits, so check the PDS for each one.
Does the sum insured go up with building costs?
Most policies index it at renewal, and one we read adds 0.5% a month during the year. Indexation is a general adjustment, though. After a renovation or a jump in local building costs, it’s on you to update the figure.
Is this personal advice?
No. It’s general information about how home insurance sums insured work, and it doesn’t consider your objectives, financial situation or needs. Read the PDS before you decide.
Reviewed by Andre Lang on 20 October 2026.
Andre Lang is an Authorised Representative (AR No. 1323803) of Australian Broker Network Pty Ltd (AFSL 253131), and a director of Lang Broking Co Pty Ltd (Corporate Authorised Representative No. 1323797), which trades as Luxury Cover.
Luxury Cover arranges insurance as a broker. The policies are issued by the insurers, and what they cover depends on the policy you choose. Each quote links to its product disclosure statement. General information only.