There is no better time than right now to review your company's insurance coverage. Have you expanded or downsized since your last policy review? Do you know if your business is properly covered in case of an accident, litigation, or loss? An Insurance Appraisal can be a vital tool to a company when making insurance decisions.

Insurance is a financial protection that a business purchases to allow it to take risks while protecting all interested parties from loss. From fire to theft, natural or man-made causes, there are hundreds of ways that a business property can be damaged or destroyed. Without the proper insurance, a business may find itself in the unfortunate predicament of having to pay out-of-pocket for repairs or reconstruction while continuing mortgage payments to its lender for the now damaged property.

For most companies, insurance is just another bill that comes in and gets paid month after month. We know we have to have it, we know why we have to have it, but unless we are paying that monthly bill or involved in a claim, insurance is far from our minds. Do you know if you're properly covered in case of an accident, litigation, or loss? An Insurance Appraisal can be a valuable aid to a company when deciding how much insurance to carry or determining if you are carrying too much insurance and overpaying premiums. 

The Insurance Appraisal has been recognized as a valuable tool for any size company in assisting with determining the amount of coverage a company needs. An insurance appraisal takes into consideration important factors necessary for planning and risk management including keeping premiums at a proper level and establishing proof of loss before a loss occurs.  

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

  • Insurance Replacement Cost New (IRCN): the amount it takes to replace damaged or destroyed property with new buildings, equipment, and furnishings of like kind and quality; IRCN considers any improvements or upgrades; and
  • Actual cash value (ACV) or Sound Value: the replacement cost of property, less the accumulated depreciation for age and wear.

In very rare cases, Reproduction Cost New is requested. Reproduction Cost New estimates the cost to replicate a building, piece of equipment, or other property exactly as the original, using the same materials, without consideration of any upgrades or improvements.

Best Practices & Advantages of an Insurance Appraisal:

  • Ensures the correct level of coverage: The Insurance appraisal will demonstrate proper due diligence, as well as ensuring that the client is neither over-insured nor under- insured.
  • Provides current insurable replacement cost new values: The values required for insurance placement are specific to the industry. Other values do not apply, and estimates of Insurable Replacement Cost New are undocumented and generally unreliable.
  • Considers insurance exclusions unique to the policy: If provided to the appraiser, insurance exclusions are recognized and not included in the appraisal, resulting in a more accurate value.
  • Can provide Actual Cash Value (Sound Value) if required by policy: While most policies are written for Replacement Cost coverage, this depreciated value can be provided and documented in the appraisal report.
  • Provides an accurate property record: The appraisal will not only place a value on major machine units, but also capture values value of the minor plant equipment that supports the production units.
  • Provides construction details on buildings: Provides details on building type and construction, which is important when a facility has been expanded throughout the years.
  • Segregates property into specific buildings or locations in the event of a partial loss: Considers construction and placement of firewalls to properly segregate contents into a specific building location.
  • Provides proof of loss before the loss occurs: Detailed records of buildings and contents can be used to substantiate claim.
  • Eliminates unexpected co-insurance at the time of loss: Ensures that the full amount of a claim up to the policy limits can be expected, with no penalty for under insuring of the property.
  • Provides evidence for tax purposes to establish the amount of an uninsured loss: Assists in the determination and support of loss amounts in the event of any uninsured loss.
  • Provides Independent experts to assist with proof of loss and any subsequent valuation issues: Sobel Valuations LLC can be retained to support values contained within the appraisal report to assist with the claim preparation.

Over the years we have prepared insurance appraisals for chemical plants, law offices, office buildings, apartment complexes, manufacturing facilities, and construction equipment.