Written by William Paull
Co-Founder & Account Director
Reviewed by Cyndie Vockler
Senior Account Manager
On this page
- What is a commercial building sum insured, and what should it actually be based on?
- What should a genuine rebuild cost figure actually include?
- Does my commercial building sum insured need to include GST?
- Guess, calculator or valuation: what's the right way to set the number?
- Does indexing my sum insured every year keep it accurate?
- How do you check your own number, and fix it if it's short?
- FAQ
- Know the number, don't guess it
What is a commercial building sum insured, and what should it actually be based on?
Your sum insured should be based on one thing only: what it would cost today to demolish, redesign, get approved and rebuild your commercial building. It is not what you paid for the building or what it would sell for. A bank's lending valuation is a third number again: what the bank could recover if it had to sell.
What should a genuine rebuild cost figure actually include?
A rebuild cost figure covers more than reconstructing the building: demolition and debris removal, professional fees, upgrades to today's codes and cost rises during the rebuild sit on top. Leave any of them out and the number is short before a single price moves.
Demolition and debris removal. Clearing what's left of the old building is a real, sometimes substantial cost separate from reconstruction.
Professional and consultant fees. A rebuild needs an architect or building designer, structural and services engineers, and often geotechnical or other site surveys, all before a builder is engaged. Council and approval costs sit on top.
Bringing the building up to today's codes. A commercial building approved twenty years ago can be rebuilt today only to current fire safety, accessibility, energy efficiency and structural standards. On every business pack wording we place, the co-insurance clause does not scale that extra cost down. Your schedule shows whether it is paid on top of your limit or from what is left of it.
Cost escalation during the rebuild itself. Approvals, design and construction commonly take well over a year for a serious commercial loss, and costs keep moving: a sum insured at today's prices funds a rebuild priced later.
Australian quantity surveyors commonly note that these four items can add 20 to 30 per cent or more above a bare per-square-metre construction estimate. Treat that as a reason to get a proper assessment, not a number to insure to.
Does my commercial building sum insured need to include GST?
If your entity is registered for GST and entitled to claim input tax credits on the property, your sum insured is generally based on the GST-exclusive rebuild cost. If you are not entitled to claim it, in full or in part, the number needs to account for the GST.
A builder's rebuild quote will normally include GST. Get your GST status wrong on the paperwork and you can end up short even when your sum insured is high enough.
A residential building's sum insured must include GST. A commercial building's sum insured must include GST if the insured entity is not registered for GST. That is why we always ask for your ABN when we set up cover. Getting the basis wrong can leave you roughly 10% over- or under-insured, so confirm your position with us when your cover is set up or renewed.
Guess, calculator or valuation: what's the right way to set the number?
Owners generally set a sum insured one of three ways: carrying forward a rough figure or last year's number, using an online calculator, or getting a professional valuation. Only the third one is built around your actual building.
A guess or last year's figure. The most common approach is the least reliable: a number nudged up a little at renewal, probably never based on an assessment of your building.
An online calculator. A calculator works only from what you type in: location, floor area and a broad construction type. It cannot see your building's condition, additions or compliance with current codes, and it cannot give you advice about your situation. A published AFCA determination shows how far short a calculator figure can fall; we tell it on our desktop building replacement valuation page.
A professional valuation. A qualified valuer or quantity surveyor produces the only number of the three that would hold up if your insurer tested it against the co-insurance clause. The report we commission is a registered valuer's desktop assessment, covering everything a rebuild cost figure needs to include.
Does indexing my sum insured every year keep it accurate?
No, not on its own. Indexation lifts last year's figure by a small percentage in line with average cost inflation, but it cannot fix a wrong base, and recent commercial construction cost rises have outpaced typical indexation rates. It is a maintenance tool, not a substitute for a fresh valuation.
Non-residential building construction costs across Australia are up about 40% since 2018 on Australian Bureau of Statistics figures; our guides show how fast they climbed and how far an indexed figure falls behind.
In our experience nothing on the insurer's side catches a short figure: insurers do not test whether a commercial building's sum insured is right, because an underwriter is not a valuer and it is not their role to advise you on the figure. So a number can renew year after year without anyone outside your own business ever having looked at it.
How we set the uplift on our own renewals. At renewal we lift a commercial building's sum insured by the Australian Bureau of Statistics' annual figure for non-residential building construction across Australia, which is 4.4% for the year to June 2026. We move to the new figure each quarter as the ABS publishes it. That applies where we already have good reason to think the building is adequately insured. Where the number looks light, or nobody has measured it in years, an index is the wrong tool, so we go back to a rebuild valuation instead. An index keeps an accurate sum insured moving with the market. It cannot make an inaccurate one right, and we do not present it as though it can.
How do you check your own number, and fix it if it's short?
Ask yourself three things: has this figure ever been through a professional assessment of your building? Does it account for demolition, professional fees, code upgrades and escalation? And is it based on today's costs, not the year you bought or built? If the answer to any of those is no, treat the number as unproven until it's checked.
From the year of your last valuation, the Australian Bureau of Statistics figure shows how far building costs have risen since.
For commercial building clients, Consolidated Insurance Brokers commissions a desktop building replacement valuation at no cost to you, carried out by a registered valuer.
The desktop valuation is commissioned for our purposes as your broker, to inform the advice we give you.
If the valuation finds a gap, we close it at a pace you can manage, with a choice at every step, including where adjusting the excess helps keep a higher, accurate sum insured affordable. Sometimes your number is already close enough, and we will tell you so.
FAQ
Is sum insured the same as market value?
No. Consolidated Insurance Brokers helps set it on rebuild cost. Market value is what a buyer would pay and includes the land, so in a strong market it can sit above rebuild cost, and insuring to it wastes premium. A building bought cheaply years ago can cost far more to rebuild than it would sell for. Land doesn't burn down. The structure does, and rebuild cost decides your claim.
Should my commercial building sum insured include GST?
It depends on whether your entity is entitled to claim input tax credits: if it is, the sum insured is generally based on the GST-exclusive rebuild cost; if it is not, in full or in part, the number needs to account for the GST. If you're unsure which basis applies, Consolidated Insurance Brokers will confirm it with you when your sum insured is set, not after a claim.
Should my sum insured include demolition costs?
Yes. When Consolidated Insurance Brokers helps set your sum insured, demolition and debris removal belong in the number. They are a real, sometimes substantial cost separate from the new construction, and a figure built only on putting the building back leaves them out.
Know the number, don't guess it
We will put a registered valuer's figure on your building at no cost to you.