Should Building Insurance Cover Me If My House Burns Down?

Building insurance would certainly provide some cover if your house burns down, but the important thing is to make sure that it's enough cover. It is important to understand that the value of your house on the open market is not the same as the rebuilding cost.

Your house's value is partly down to the value of the land it stands on and partly down to the house itself. The price of the land it is on will be high or low depending on whereabouts in the country you live, what the transport links are like, local schools and so on. If your house is destroyed or badly damaged, the lands is probably likely to still be there, so the value of the land is not taken into account for insurance purposes. The cost of building a replacement house doesn't change throughout the country as much as land values do, so the cost of building, say, a thee bed house, in a depressed inner city area is likely to be roughly the same as in a stockbroker belt.

So although the insurance value is not as volatile as the market value of your house, you must make sure that each year the amount of insurance is enough to cover the material costs and labour charges that it would take to rebuild your house.