INSURANCE REPLACEMENT COST

Keystone Appraisals Inc. specializes in Replacement Cost Insurance Appraisals. These reports are completed in a narrative format and adhere to the Canadian Uniform Standards of Professional Appraisal Practice. Each report’s purpose is to determine the Replacement Cost of the entire structure, or structures, for insurance purposes.

Replacement Cost is defined as “The estimated cost to construct, as of the effective appraisal date, a building with utility equivalent to the building being appraised, using contemporary materials, standards, design, and layout.  When this cost basis is used, some existing obsolescence in the property is assumed to be cured.”

Construction costs in the Kootenays have increased considerably in recent years and our experience in the commercial market indicates that a significant number of commercial properties are underinsured. It is important to discuss with your insurance broker the legal and financial implications associated with underinsuring your commercial property. In many cases underinsuring results in the potential co-insurance with the insurance policy holder and significant risk to the property owner. In the event of a significant loss, the owner may be insured for only a portion of the building value.

Some of the influencing factors are listed below:

• Trade Shortages
• Material Shortages
• Material Pricing
• Building Code and Step-Code Requirements
• Prevalence of Cost-Plus Contracts