When you are taking out insurance for your property or building you must make sure that you are covering all the risks that you want to be protected against. A proper building insurance valuation can ensure that you, as a property owner, have adequate insurance and are not paying for any excessive coverage.
An insurance valuation will indicate the replacement cost of the building so that an insurance claim can provide adequate finance for rebuilding the property that has become the casualty of an incident that has led to its destruction. Construction costs increase over time, and whenever you need to renew insurance cover, it makes sense to get the building evaluated so that the latest costs are covered.
Proper building insurance valuation can be of help to the insurance company, owners of a property, any lenders, limited partners or even tenants. The main objective of such an insurance valuation is to ensure that adequate finance is generated through insurance claims to replace the building or property that has been destroyed by fire or other causes. These valuations may not cover any loss of rent that is a result of the building becoming unusable due to the damage. To cover this, separate business interruption insurance will need to be taken.
An insurance valuation will focus on the cost of replacement and will help to replace the building so that it is a functional equivalent of the existing property. This may not cover the costs of preparing the site, underground utilities, sidewalks, pavements and foundations. Appraisers who calculate these valuations will visit the site and document the type and quality of building construction materials and their quantities. They may also use square foot methods of calculations to arrive at estimates for rebuilding. Segregate cost methods calculate the actual cost of each component of the building being evaluated. Appraisers may need to get information from builders, developers and from construction cost manuals, before arriving at the final evaluation for purposes of insurance. Real estate professionals may also be consulted to review the accuracy of any data used form various sources.
An insurance appraisal or valuation can provide a third party and unbiased valuation of the estimated cost of replacement of a building for purposes of insurance. This is different from a real estate appraisal that will indicate the fair market value of a property. It is required that these valuations are carried out every year so that adjustments can be made to the insurance coverage. Accurate valuations can protect the insurer, any lenders, and the owners, whenever the building suffers any casualty. Most insurers will specify the nature of the events that they will accept as a casualty.
