Commercial property insurance valuation

[Reyed Mia (Apprentice, DIU)]

Commercial property insurance valuation

Property valuation basics

Property is considered to be anything that has value and includes:

Real property, which is land and the permanent things on it, like buildings, outdoor fixtures, permanent machinery and equipment

Business personal property, which is all other property that's not classified as real property and can be easily moved, such as computers, telephones and office furniture

Most business properties insurance companies use two different methods for determining the value of property:

Replacement cost, which refers to the amount it takes to replace damaged or destroyed property with new buildings, equipment and furnishings

Actual cash value (ACV), which is the replacement cost of property, less the accumulated depreciation for age and wear

Determining how much your property is worth

Determining the value of your business property for your business owners policy is not difficult, but it takes a little time and effort. If you've kept good records, such as receipts and expenses, you should be able to estimate the replacement value of your office furniture, equipment, computers and other technological devices.

Take inventory of your stock and estimate the average value of it on any given week. If you have antiques, valuable artwork or other hard-to-replace items, have them appraised and include the total in your valuation.

One way to determine that figure is to engage a local contractor and request an estimate for replacing the building. Another way is to contact a Nationwide agent who can provide a state-of-the-art estimating tool.

Other valuation considerations

While some insurers might allow you to insure for less than 100% of the replacement cost, that might not be the best idea. Depending on your business owners policy and insurance company, you might have a co-insurance penalty clause. If so, you'll have to pay a penalty if you under-report your insurance valuation or insure for less than 100% of replacement value.

For example, if your building is valued at $300,000 and you have a co-insurance value of 90%, you're insured for 90% of the building's replacement value ($270,000). If your building is insured for half the co-insurance amount ($135,000), you'd be reimbursed for only half of the loss. So if you sustained a $50,000 loss, you'd receive only $25,000.

Review your coverage on your policy's anniversary date and make appropriate changes to ensure that you have adequate and appropriate levels of coverage.

https://www.nationwide.com/insurance-valuation.jsp