The importance of building appraisals: Q&A with RMS

Are your client's commercial properties accurately assessed to insure replacement cost value?

An estimated 70% of commercial buildings in Canada are under-insured by up to 40% of the replacement cost value, state experts at Risk Management Services (RMS), SCM Insurance Services. This is why it’s important to ensure commercial property owners are covered for damage caused, for example, by wind, fire or storm. Getting an accurate building appraisal will help assess the replacement cost value of the property, according to Monica Shin, director of sales for western Canada at RMS.

Q. What is the process for building appraisals?

A. The first step in a comprehensive risk management program is to accurately assess the insurance replacement cost value of commercial buildings/property. Look for a professional company that uses in-house and external costing systems, and has discussions with local contractors and engineering firms to provide an accurate replacement cost value for all commercial buildings. The replacement cost value should include current market prices for materials, labour, manufactured equipment, contractor’s overhead and profit, as well as fees to properly indemnify risk.

Q. How can building appraisals enhance a broker’s business?

A. The broker can differentiate themselves by ensuring their clients can benefit from having proper ‘new’ replacement reconstruction value at the time of loss. This enables the broker to provide their clients better coverage through “stated amount” instead of co-insurance. More importantly, at the time of loss the clients will have some peace of mind knowing that the values on his/her property are correct, preventing further ‘unexpected’ business setbacks. This can be a critical step in helping the broker mitigate losses due to inaccurate data and contribute towards minimizing their E&O exposures.

Additionally, when valuation works in combination with loss control by identifying hazards associated with the risk’s COPE (Construction, Occupancy, Protection, Exposures) elements it delivers a comprehensive risk management program. This focused attention can elevate the conversation from good to great in providing tailored insurance solutions to meet the customer’s individual needs.

Monica Shin is director of sales for western Canada with Risk Management Services (RMS), SCM Insurance Services. For more information, click here.

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