Does My Insurance Cover Full Rebuild Cost?
If your house burned down tomorrow, would your insurance cover the full cost to rebuild it — or would you be left with a major shortfall?
Many South African property owners are surprised to find their insurance payout doesn’t stretch far enough. The reason? Their sum insured was too low to begin with.
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What Does My Policy Actually Cover and Does My Insurance Cover Full Rebuild Cost?
When it comes to building insurance, your policy is based on the sum insured you’ve provided. That figure should represent the total cost to rebuild your property from scratch, including:
- Demolition and site clearance
- Materials and labour
- Professional fees (architects, engineers, permits)
- VAT and inflation
- Site conditions and access costs
If your sum insured is incorrect, the insurer won’t cover the full loss. You’ll only be paid out proportionally based on what you were actually covered for.
The Average Clause: A Costly Surprise
South African insurers apply the average clause when a property is underinsured. That means your payout is reduced based on the percentage of underinsurance.
Let’s say:
- Your rebuild cost is R2.5 million
- You insured for R1.75 million (only 70%)
- A fire causes R1 million in damage
- The insurer only pays 70% = R700,000
- You must cover the rest out of pocket
This happens every day to property owners who didn’t realise their policy was based on outdated or incorrect information.
The Risks of Guessing or Using the Wrong Value
Many people:
- Use the market value of the property
- Base the sum insured on what they paid years ago
- Rely on online calculators with no inspection
- Don’t include outbuildings or improvements
- Forget about updated building regulations and inflation
This leads to gaps in cover that only become visible when it’s too late.
Why Construction Costs Keep Climbing – Does My Insurance Cover Full Rebuild Cost?
In South Africa, building costs have risen sharply due to:
- Material price increases (steel, timber, cement)
- Labour cost inflation
- Higher professional and municipal compliance fees
- Load shedding-related delays and backup systems
- New building regulations and environmental standards
What it cost to build 5 years ago may no longer be realistic today.
Signs You Might Be Underinsured
You may be at risk if:
- Your policy hasn’t been reviewed in over 3 years
- You’ve made renovations, additions, or upgrades
- Your sum insured is based on your original purchase price
- You’re using municipal valuation figures as your guideline
- You haven’t had a professional valuation done
Each of these factors increases your exposure to underinsurance. Are you asking yourself – Does My Insurance Cover Full Rebuild Cost?
How a Replacement Cost Valuation Helps
A registered valuer will:
- Inspect your property thoroughly
- Calculate the full cost to rebuild using current rates
- Include all necessary allowances (demolition, fees, VAT)
- Provide a report accepted by insurers and brokers
You can then update your policy with confidence, knowing your cover matches your risk.
Example from My Work
A client in Knysna had been insuring her home for R2.2 million based on an estimate from years ago. After I conducted a full replacement cost valuation, we found the current rebuild cost was R3.4 million. She adjusted her policy, and while her premium increased slightly, she now has real protection — not a false sense of security.
What to Do If You Think You’re Underinsured
- Check your policy — look at the current sum insured
- Compare it with today’s building rates (R/m² for your area and building type)
- Get a professional valuation if you’re unsure
- Update your policy with your broker or insurer
Thinking Does My Insurance Cover Full Rebuild Cost? Contact me:
Insurance is only helpful if it covers what it’s supposed to. A gap in your building insurance can cost you hundreds of thousands — or even force you to downsize after a disaster.
If you want to be sure your cover reflects the real cost to rebuild, I can assist with an accurate, insurer-approved valuation tailored to your specific property and location.
Claire King 0732324407
Also have a look at the following related articles:
Eight Common Mistakes Farmers Make When Valuing their Property
Agricultural Valuations for Estate Planning and Inheritance
Selling Your Agricultural Property? Start with a Registered Valuation
Agricultural Property Valuations in George – a complex challenge for Valuers
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