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You buy a house, or open a business. You get insurance, choose an insured value… and that’s it. Or is it?

Because very often, what you’ve insured is not the actual cost to rebuild your home or premises. And when disaster strikes — fire, collapse, explosion — you discover that your building insurance doesn’t cover even close to what it takes to restore everything.

Why? Because the value was poorly calculated.

In this article, we’ll explain how to correctly calculate the real reconstruction value, what the PEM module is, what’s included in the construction execution budget, and which hidden costs can affect your compensation if they’re not considered.

What is the real reconstruction value?

The real reconstruction value is the amount it would cost to rebuild your home or business premises from scratch, under the same conditions as before the incident.

It includes:

Construction materials

Labor costs

Technical fees (architects, engineers…)

Health and safety obligations

Licenses, taxes, and duties

Applicable VAT (10% or 21%)

This value is NOT based on the market price or cadastral value. Market value reflects supply and demand, and the cadastral value is a tax reference. Neither are valid for insurance purposes.

Why is it so important to calculate it correctly?

Because this value determines the sum insured for the building in your policy. And if it’s too low, your insurer will apply the proportional rule in case of a claim.

Real example:

Real reconstruction cost: €150,000

Insured value: €100,000

Damage: €60,000

Indemnity after applying proportional rule: only €40,000

You lose €20,000 for having underestimated the real value.

What is the building (continent), and what does it cover?

The building or continent refers to the physical structure of the property:

Foundations, walls, ceilings, floors

Fixed installations: plumbing, heating, electricity, gas

Doors, windows, shutters, built-in wardrobes

Additional structures: garages, storage rooms, pools, porches…

Building insurance covers damage to these elements — but only up to the declared insured value. If that value doesn’t reflect the real reconstruction cost, compensation will be reduced accordingly.

How to properly calculate the reconstruction value

Here’s a step-by-step guide:

1. Calculate the total built area

Determine how many square meters your property includes:

Full floors

Attics or basements

Garages, storage rooms, cellars

Pools, covered terraces, closed porches

Check the official cadastral record to avoid omitting any spaces.

2. Apply the PEM module

The PEM (Presupuesto de Ejecución Material) is the cost per square meter of construction, which depends on:

Type of building

Geographic region

Level of finishes or materials

Residential buildings typically range between €700 and €1,200/m². Commercial properties may go above €1,500/m².

Where to find the PEM value: Official architectural boards

Professional construction consultants

Public databases (e.g., CEDEX, ITeC)

Insurance brokers or technical surveyors

3. Add indirect costs

Once you have the base value, you need to add all the additional costs involved in reconstruction:

Technical fees (architect, project manager, etc.): 8–12% of PEM

Health and safety expenses: 1–2%

General expenses: coordination, legal permits, project insurance

Municipal taxes: permits, urban planning fees, etc.

VAT: 10% for housing, 21% for commercial spaces

These are often overlooked and can lead to underinsurance if not included.

4. Don’t forget extra structures or features

Do you have a pool, enclosed pergola, porch, perimeter wall, detached garage?

If not declared in your policy, the insurer may exclude them even if they were damaged in the claim.

Tip: include a cadastral map and technical description of the property when setting up the policy.

How often should you review the value?

At least once a year, and especially if:

You’ve renovated, extended, or upgraded the property

The use of the property has changed

There has been a rise in construction costs in your area

Can I calculate it myself?

You can make an estimate, but ideally you should consult:

A qualified technician (architect, surveyor)

A professional insurance broker

A licensed building appraiser or loss adjuster

At MataSeguros, we offer a free review of your reconstruction value if you’re about to claim — or just want peace of mind.

Contact us and we’ll help you.

Frequently asked questions

Is market value a valid reference? No. Market value is based on supply and demand. Insurance is based on actual reconstruction cost.

Can I use cadastral value? No. It’s usually far lower than the real cost. Using it as a base puts you at risk of serious underinsurance.

What if I don’t declare an annex like a garage or pool? The insurer may exclude it or apply the proportional rule due to discrepancy with the official records.

Conclusion

Calculating the real reconstruction value isn’t just paperwork. It’s what determines whether your building insurance protects you properly — or leaves you exposed when you need it most.

Don't risk finding out too late. If you’re unsure, MataSeguros can help.

Contact us for a free policy review and avoid costly surprises.