What Is an Insurance Replacement Cost Assessment?
When a house is damaged, your insurer pays against the sum insured on your policy. If that number is too low, you carry the gap. An insurance replacement cost assessment is how you check it.
This guide explains what the assessment is, what goes into the number, when to get one and how to read the result. It is general information, so check your own policy wording and talk to your insurer or broker about what they require.
What an insurance replacement cost assessment is
It is a written estimate of the cost to rebuild a building to its current form, using today’s materials, labour and methods, if it were destroyed. People call it by several names, including reinstatement cost assessment, replacement cost valuation and insurance valuation. The names are used loosely. What matters is what the report includes and who prepared it.
The result is a figure for the building only. It is the figure you can give your insurer to support the sum insured, subject to the terms of your policy.
Market value includes the land and reflects what a buyer would pay. Insurance is about the cost to rebuild. ASIC’s MoneySmart says using market value instead of rebuild cost is a common cause of underinsurance. We compare the two in replacement cost vs market value.
What goes into the number
- Building structure and services
The structure, roof, walls, finishes, fixed fittings and services such as plumbing, electrical and air conditioning, priced as a rebuild.
- Demolition and site clearance
Removing damaged material and clearing the site before work can start. ASIC’s MoneySmart lists demolition and site clean-up among extra costs people miss.
- Professional fees
Fees for architects, engineers and other professionals involved in a rebuild, including approvals and council costs where relevant.
- Escalation
Construction costs can rise between a loss and the finished rebuild. A thorough assessment allows for that.
- Temporary accommodation
Some policies cover this separately from the sum insured. Check your policy rather than assuming it is in or out.
- Not included
Land value, contents and, depending on the policy, items such as landscaping or outbuildings. The report should say what it covers.
Koste’s insurance cost assessments cover the building structure and services, demolition and site clearance, professional fees and escalation for inflation.
Why people get one
ASIC’s MoneySmart says underinsurance means your cover will not stretch to the full cost to rebuild, repair or replace, and that rising building costs can push rebuild costs up even if nothing changes at your property. It also notes that most policies pay only a proportion of a claim when you are underinsured, and that the proportion applies to all claims, not only a total loss.
- Cost to rebuild the building (assessed)$500,000
- Sum insured on the policy$400,000
- Share of the rebuild cost that is insured80%
- Paid on a $20,000 claim (averaging)About $16,000
Not every policy has an averaging clause, and the threshold and wording vary by insurer and policy, so MoneySmart notes it can apply when you are insured for less than 80 to 90% of the rebuild cost. Read yours or ask your insurer how it handles a gap between the sum insured and the cost to rebuild.
Overinsuring is the other side. A sum insured well above the real rebuild cost can mean paying higher premiums than you need to. An assessment aims to land on the right figure rather than a guess.
When to get one
- 1When you take out or change a policy
- You are buying a property or insuring it for the first time
- You are switching insurers or moving to a new type of policy
A guess at the start tends to stay in place for years.
- 2After the building changes
- A renovation, extension, new kitchen or deck
- Work that was done before you bought the property
MoneySmart notes renovations can increase the rebuild cost if your policy is not updated.
- 3On a regular schedule
- MoneySmart suggests reviewing cover every year and after big changes
- Rebuild costs can move quickly when materials and trades are in demand
A figure set a few years ago may now be well short.
- 4Investment, strata and commercial property
- Investors who want a documented basis for the sum insured
- Owners corporations that have valuation obligations
- Business owners with larger or specialised buildings
Rules differ by state and property type. See strata insurance replacement valuations.
How an assessment is done
- 1. Get in touchTell us about the property and what the insurer or policy requires.
- 2. InspectionA surveyor inspects the building on site.
- 3. Measure and priceAreas, structure, finishes and services are measured and priced at current rates.
- 4. Add allowancesDemolition, fees and escalation are added to complete the rebuild figure.
- 5. ReportYou receive a written report to give to your insurer or broker.
The process above follows the one on Koste’s service page: contact, inspection, then a report ready for your insurer or broker. Ask your insurer what it needs before you order. Fees depend on the property, so ask for a quote.
Information that makes the figure more accurate
- Plans, previous reports or council approvals if you have them
- A list of renovations and when they were done
- Details of unusual features: heritage items, pools, solar, basements, imported finishes
- Your current policy summary and sum insured
- Using the purchase price or a bank valuation as the sum insured
- Forgetting demolition, fees and approvals
- Setting a figure once and never revisiting it
- Assuming a calculator knows about your fittings and finish level
Frequently asked questions
What is an insurance replacement cost assessment?
It is a written estimate of the cost to rebuild a building today if it were destroyed, using current materials and labour. It excludes the land and is used to set the sum insured on a policy.
Is a replacement cost assessment the same as a valuation?
Not the same as a market valuation. A market valuation estimates what a property would sell for, including the land. A replacement cost assessment estimates the cost to rebuild the building. The names are sometimes used loosely, so check what the report covers.
How often should I review my sum insured?
ASIC’s MoneySmart suggests reviewing cover every year and after renovations or big changes. A formal assessment is worth considering when you buy, renovate or if you are unsure your sum insured is realistic.
Will my insurer accept the report?
Insurers set their own requirements. Ask yours what it needs before you order. A report from a Chartered Quantity Surveyor gives a documented basis, but acceptance is for the insurer.
How much does an assessment cost?
Fees depend on the property. Contact Koste on 1300 669 400 or use the contact page to get a quote.
About Koste. Chartered Quantity Surveyors with RICS, Certified Quantity Surveyors with the AIQS, and registered tax agents.
Important information. This article is general information, not insurance, financial or valuation advice. Insurance policies differ. Read your policy and speak to your insurer or broker about your cover and what they require.
Sources. ASIC MoneySmart: Home underinsurance (last updated 18 August 2026); Koste: Insurance replacement cost assessments.
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