Record insurance claims, rising rebuild costs: why 2026 is the year to check your sum insured

Record insurance claims, rising rebuild costs: why 2026 is the year to check your sum insured 

Underinsurance has become a potential risk for UK commercial property owners this year. Rebuild costs have climbed steadily since 2020, and government figures show construction material prices remain higher year on year into 2026, yet many building sums insured have barely moved in that time. For any business or landlord who has not reviewed their insurance recently, this is the year that gap becomes expensive. 

Why is underinsurance rising in 2026? 

Industry research published found that over two thirds of commercial properties in the UK are currently underinsured. Government data on construction material prices shows costs remain higher than a year earlier, continuing a trend that has pushed rebuild costs up substantially since 2020. 

Three factors tend to combine to create this gap: 

• Construction inflation outpacing the index-linked uplift that many policies apply automatically each year. 
• Sums insured based on market value or an original purchase price, rather than the true cost of rebuilding. 
• Refurbishment, extension, or fit-out works carried out without the sum insured being updated to reflect them. 

Regulatory change adds a further layer. Requirements introduced under the Building Safety Act, along with evolving fire safety and energy efficiency standards, can increase the cost of rebuilding a property to current standards after a loss, even where the original building was straightforward. 

What is the difference between rebuild cost and market value? 

The question of rebuild cost vs market value causes more underinsurance than almost any other single factor. Market value reflects what a buyer would pay for the property, including the land it sits on, its location, and prevailing demand. Rebuild cost takes all of that away and asks a different question: what would it cost to reconstruct the building from scratch on the same site. 

That figure needs to include the cost of materials and labour, professional fees for architects and surveyors, demolition and site clearance, and VAT where it cannot be recovered. Our guide to the difference between red book valuation and market value looks at this distinction in more depth, since sale valuations and insurance valuations serve entirely different purposes and should never be used interchangeably.

Why a buildings sum insured calculator does not tell the whole story 

The calculator can be a useful starting point, offering a rough figure based on floor area and a standard build cost per square metre. For a simple, modern property, that estimate might not be far off. For most commercial buildings, it will miss too much detail to be relied upon. 

These generic tools rarely account for listed building status, complex mechanical and electrical systems, restricted site access, or the bespoke fit-out that many commercial occupiers install. They also tend to leave out demolition costs, professional fees, and the VAT treatment relevant to the specific business, all of which can add a substantial amount to the true rebuild figure. 

Where a calculator produces a number that looks reassuringly close to the existing sum insured, it is worth treating that as a prompt for a proper review, not as confirmation that the cover is adequate. 

What does a professional rebuild cost assessment involve? 

A rebuild cost assessment carried out by a RICS-regulated surveyor replaces guesswork with an evidence-based figure. Depending on the complexity of the property, this can take the form of a desktop assessment using detailed plans and specifications, or a full site visit where the surveyor inspects construction type, materials, and any features that would affect reinstatement. 

The assessment considers current build cost data for the specific type and location of the property, professional fees, demolition and debris removal, access constraints during a rebuild, and VAT. The result is a figure that insurers and loss adjusters can rely on, and one that stands up to scrutiny if a claim is ever challenged. Our article on what reinstatement cost assessments involve and how they are conducted sets out the process in more detail. 

How often should you review your building sum insured? 

The Royal Institution of Chartered Surveyors recommends a full rebuild cost assessment every three years as a minimum, and sooner if the property has undergone significant change. An extension, a refurbishment, or a change of use can all shift the rebuild figure well beyond what an annual inflation-linked adjustment will capture. 

Given how much construction costs have risen since 2020, a building sum insured that has not been formally reviewed within that period is very likely to be out of date. Waiting for a claim to find out is the most expensive way to discover the gap. 

What happens if you are found underinsured after a claim? 

Most commercial buildings policies include a condition known as the average clause. Where the sum insured is found to be lower than the true rebuild cost, the insurer applies the same percentage shortfall to any claim, no matter how large or small. 

A property insured for 70% of its correct rebuild value will typically see any claim settled at 70%, even for a modest, partial loss such as storm or escape of water damage. The business is left to fund the remaining amount itself. Where a loss also interrupts trading, understanding what a consequential loss is and whether it can be insured against becomes just as important. 

Speak to BTG Eddisons about your building sum insured 

Our building consultancy and insurance teams provide RICS-regulated rebuild cost assessments for commercial properties across the UK, giving you, your insurer, and any loss adjuster a defensible figure that reflects the true cost of reinstatement. 

With more than 180 years of experience in the property sector and over 550 surveyors, consultants, and advisers working across every region of the UK, we combine national reach with local knowledge of construction costs and conditions.  

Whether you need a first rebuild cost assessment or a review of a sum insured that has not been checked in several years, call 0330 191 8107, email [email protected], or complete the contact form below to arrange a consultation.