Correct Insurance Valuation Prevents Claim Payment Penalties
Two basic types of coverage on commercial policies are:
Real property which includes the land, buildings, and permanently attached or installed machinery, equipment and outdoors fixtures.
Business Personal Property is a term used to describe property that can be easily moved, such office equipment and furniture.
Valuation of your property is determined by two different ways:
Replacement Cost as it sounds, is the amount needed to replace damaged or destroyed property. It is important to remember that replacement value is NOT the same as market value. The cost to restore your property to its condition prior to the loss is almost never the same as its purchase or sales price. Most commercial insurance policies protect commercial buildings for replacement cost. The valuation of the building is generally the amount needed to restore you property to its pre-loss status.
Actual Cash Value limits insurance loss payments to the amount your used item was worth if you were to sell it. Coverage on an ACV basis costs less because in the event of a claim, the cost to purchase all new furniture and office equipment is considerably more that the depreciated value of your old equipment.
Business Personal Property can be insured on a replacement OR Actual Cash Value basis, depending on your choice. It is important to note that the difference between replacement cost and actual cash value can present a huge financial difference in the event of a loss and need.
While many times, the valuation of the building is determined by size and construction material, there are additional choices concerning types of coverage and deductibles.
Let the experienced professionals at Cobb-Hall eliminate confusion and provide solutions designed specifically for your needs.