Insuring your property to the correct value and keeping that value current over time is critical, and it can help you avoid paying out of pocket to rebuild or replace your building. Be proactive—don’t get caught off guard.
You work hard to maintain your house or business property, which is why it’s so important to ensure that you’re protected in the unlikely case of a full or partial property loss.
Determining adequate property limits for insurance purposes can be tricky. Costs vary depending on a number of factors, such as the age of your building, the choice of construction materials, the quality of construction and geographic location.
Be proactive and review your policy today, and you won’t be caught off guard.
If you experience a total loss, you don’t want to be in the position of having inadequate funds to reconstruct the building. You need to consider the costs of debris removal (which could include toxic elements such as asbestos, lead or oils), site preparation, and additions required under current local bylaws or building code changes, making the cost to rebuild higher than expected.
In the case of a partial loss, most property policies include a co-insurance clause, which may reduce the amount payable if the property is underinsured. A co-insurance clause establishes how the insurance company and the customer will share any costs incurred after the deductible is paid, based on a specific formula. This is why it’s in the best interest of all parties involved to ensure properties are valued accurately and reviewed annually.
There is no one way to guarantee you’ll be insured to full value, but there are several helpful guidelines that can help you get as close as possible:
- Maintain a record of accurate building construction information such as area, number of storeys, construction type and materials used.
- Commission a detailed appraisal of your building from an appraiser accredited with the Appraisal Institute of Canada and holding an “AAIC” designation.
- Obtain the actual as-built cost from the architect/ builder for new buildings.
- Discuss adjusting values based on the annual construction inflation rates (not the consumer price index) with your broker.
- Update your appraisal every year with a full re-appraisal every five years or whenever you make major upgrades or modifications.
It’s important to remember the role you play in ensuring you are fully protected by your insurance policy. Insuring your property to the correct value and keeping that value current over time is critical, and it can help you avoid paying out of pocket to rebuild or replace your building. Be proactive and review your policy today, and you won’t be caught off guard.