What is the correct amount of insurance for your commercial property?
Should you be insuring your building for the Appraisal Amount?
Should you be insuring it for Replacement Cost?
This can be a very confusing thing for insureds to determine. Both cost approach appraisals and insurance policies use the term “replacement cost” but are they the same….?
The replacement cost on an insurance policy does not take into account the depreciation of the building or the value of the land.
It is the estimated value to create an exact replica of the building at current prices using like kind and quality materials, construction standards, design, layout and quality of workmanship.
A market evaluation or cost approach appraisal may take into account depreciation and the value of the land. In order to mitigate your risk of under insuring your building and exposing yourself to a co-insurance penalty, consider getting an appraisal from a firm that specializes in reconstruction cost valuations.
If you are concerned that your building may be under insured please feel free to contact one of our knowledgeable commercial brokers at Broker Age General Insurance Services.
** NOTE: The information provided in this blog is of a general nature. It may not be specific to your particular situation. We recommend you consult our office for appropriate advice **
206, 8716 108 St | (780) 228-2222