Accurately determining a property’s value can be a challenge—however, if not done correctly, it can have serious consequences.
Inadequate or inaccurate property valuations can lead to financial surprises in the aftermath of a loss, which can also affect your pool’s bottom line.
Property valuation is the process of determining the replacement cost value of a property and its contents for coverage purposes. Although there are different methods for determining a building’s value, replacement cost is the most common and widely accepted valuation approach. Building replacement cost covers the cost to repair or replace a building with materials of like kind or quality and does not include the value of the land. It is important to note that it is not purchase price or tax/book value. Contents valuations can be more complex, as equipment replacement time varies widely and needs to be researched in more detail. If calculated correctly, these total insurable values (TIV) should capture the size and scope of a pool’s property exposures. Property valuations are generally provided to the pool in a statement of values (SOV).