Insurable Value

Insurable Value Appraisals / Replacement Cost New Reports

Insurable Value Appraisals and Replacement Cost New Estimates are typically requested by insurance companies (agents, brokers and other insurance professionals) prior to the renewal of an insurance policy on a commercial property. Property owners often obtain insurable value appraisals as part of a “required insurable amount” dispute resolution. Insurable Value is the cost of total replacement of destructible improvements to a property; may be based on replacement cost rather than market value. 

Noting that cost does not equal value. Replacement Cost New is the cost of replacing an existing property with one of equal utility, although the same materials or the same design may not be used, reflecting changes in technology, design, building techniques and costs.

The purpose of an Insurable Value Appraisal is to generate a Replacement Insurable value that can be used to support insurance coverage. It includes an inspection of the Property and a review of all available plans and surveys, which assist in estimating the sizes and areas of the individual Units, balconies, common areas, or any other pertinent structures. The property inspection is limited to things readily observable.

Replacement Cost Value (RCV) - The estimated total cost to construct, at current prices as of the effective date of the appraisal, a like kind and quality of the building, structure, or site improvement being valued, using the materials, construction standards, design, layout and quality of workmanship used in the existing building but substituting modern methods and materials for those methods and materials no longer available or typically used in construction. Replacement Cost does not consider depreciation.

 

Helpful Links:

Insurable Value
Replacement Cost Definition
Marshall & Swift Cost Guides
Buildings Costs Reference
 

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