Insurance Valuation

What is An Insurance Valuation?

• Insurance valuation answers the question, “What would it cost to replace this building with a new one, such as after a catastrophic loss?” Therefore, Insurance Valuation is concerned with Replacement Cost (New).
• Insurance valuation does not address “how much will this building sell for on the open market?” but rather, “what would it cost to (re)build it?”
• Insurance valuation is about Replacement Cost not purchase price.

Who Cares About Insurance Valuation & Why?

• Mortgage Brokers require their clients to have insurance in order to process the mortgage application. Clients seeking insurance may benefit from independent 3rd-party advice regarding replacement cost to inform negotiations over coverage (Insurance-To-Value ratio or ITV) which may affect the annual premium.
• Property owners and/or their property managers need to ensure adequate coverage to avoid low-ITV penalties and resulting out-of-pocket expenses, and to obtain stronger footing during negotiations with their insurer at renewal. Condo Boards, in particular, are tasked with ensuring adequate insurance coverage of the common elements.
• Insurers require replacement a cost valuation to inform coverage decisions. While insurers have in-house capacity to arrive at replacement cost estimates, a 3rd-party provider may supplement such capacity, or provide risk mitigation by obtaining an expert opinion from a valuation specialist.

When Would They Obtain An Insurance Valuation?

• Our clients typically seek an Insurance Valuation when they are negotiating the purchase or renewal of their insurance policy.
• Clients often seek an updated Insurance Value (Replacement Cost) when market conditions change such as construction costs rising, or falling.
• Clients also look to update the Insurance Value when they have made significant changes such as extensive renovations to an existing building, or adding another building.

What Goes Into An Insurance Valuation?

To arrive at the Insurance Value, Otto & Company’s Real Property Appraisers apply a multi-step process:

FIRST Your appraiser will work to understand the property by undertaking a thorough on-site inspection. During this site-visit, the appraiser will take measurements to understand the quantities involved, while observing and noting details about materials and finishes.

SECOND Your appraiser researches the construction costs. Otto & Company uses a variety of sources including the comprehensive RSMeans cost databases.

THIRD Your appraiser puts these together into a comprehensive cost-model that determines the costs, and which the appraiser adjusts to ensure the particulars of the subject property are properly reflected.

FOURTH Your appraiser completes a thorough report that can stand alone in describing the property to be insured and the replacement costs associated with that property. The report provides appropriate documentation of the building to be replaced, as a guide to replacement cost decisions, as well as a breakdown of the top-level elements and their associated costs. This concludes with a dollar-figure representing our opinion as to the most likely cost to replace the building.

How does Otto & Company do Insurance Valuations better?

• You can rely on Otto & Company for an accurate valuation. We are an independent, neutral, 3rd-party concerned solely with the analysis of Real Estate.
• Otto & Company brings over 30 years of Southern Ontario valuation experience, and its accumulated knowledge base. We perform insurance valuations regularly on properties ranging from historic churches to upscale single-family residences, condominium townhouses, apartment towers, and everything in-between.
• Our appraisers are trained in cost estimation, and are required to obtaining training from RSMeans and other industry bodies prior to completing Insurance Valuation engagements.
• Our appraisers benefit from Otto & Company’s in-house quality review and strategic guidance processes, which are continuously refined to ensure every valuation is a high quality valuation.
• Our appraisers use the latest and best replacement cost databases.
• Our appraisers bring extensive industry experience.

For a free consultation or proposal
Call (519) 432-2232 and speak with one of our consultants,
E-mail us at [email protected],
or click here to request a price quote!