As rebuilding costs continue to rise, Gallagher is warning that many homeowners could be underinsured if their cover has not kept pace with the current cost of repairing or replacing a home.
According to the brokerage giant, the gap between insured values and actual rebuilding costs has widened as pressures build across the construction sector. Higher material prices, ongoing labour shortages, supply chain disruptions, and sustained demand for repairs after major weather events have all contributed to rising costs, making it harder for existing cover levels to keep up.
In this environment, reviewing sums insured becomes less of a routine task and more of a necessary check. Gallagher pointed to independent property valuations as a more reliable way to align cover with current rebuilding costs, rather than relying on broad inflation measures. These valuations are typically recommended at least every three years, though timing may vary depending on market conditions.
One common mistake is relying only on Consumer Price Index (CPI) increases when reviewing a home building policy.
“Relying solely on the CPI could result in a home building insurance payout falling significantly short if their property is severely damaged or destroyed,” Gallagher said.
There are also simpler ways to sense-check whether cover is still adequate. Online calculators can provide an initial estimate of replacement costs, while discussions with a broker can help clarify how policy terms - such as sub-limits, exclusions, or optional adjustments - might affect a claim. In cases of total loss, a registered builder or architect can provide a more precise estimate of rebuilding expenses.
Gallagher said the structure of the policy itself can also shape how much is ultimately paid out. For example, provisions related to underinsurance can reduce a claim if the insured amount falls below the actual cost of reinstating the property. The declared value - set when a policy is taken out or updated - also plays a role, as it should account not just for construction costs but for associated expenses such as professional fees, debris removal, and compliance with current regulations.
Other mechanisms, such as “average” clauses or “day one reinstatement” provisions, can further influence the outcome of a claim, either limiting payouts or allowing some buffer against rising costs. Meanwhile, exclusions define what is not covered and can create additional gaps if not clearly understood.
“Understanding these terms and how they relate to your home building insurance is critical,” Gallagher said.
