What is the Right Insurable Value for My Building?

What is the Right Insurable Value for My Building

What is the right insurable value for my building? No matter the products they produce or sell, or the services they provide to companies or individuals, companies all operate out of a certain locale. Whether a business is a small deli or convenience store on a busy street corner, a well-known marketing firm, or a dentist or doctor’s office, it is almost certainly located in some kind of a building. In purchasing commercial insurance coverage to safeguard their company’s assets and property, and to allow their organization to continue to function in the event of a loss, or claim, business owners should make sure that they have an understanding of the proper insurable value of one of the most important thing they need their policy to protect – their business’s building.

The two most common insurance valuations are replacement cost (RC) and actual cash value (ACV). Simply stated replacement cost is the amount needed to replace the building with like and kind. Actual cash value if replacement cost less depreciation. If a building is 10 years old and the building is depreciated at 2% a year the ACV would be 80% of the ERC.

Buildings also have a market value which is normally the selling cost . . . or the amount a willing buyer will pay. The market value usually includes such uninsured amounts as the value of the lot.

Another method of determining value could be utility value. A brick school house would have a 100% utility value to be used as a school, but might have a much lower utility value if it will be used for a storage building that in the event of loss might be replaced by a pole barn.

The existence of a coinsurance clause will help the insured decide how much coverage she wants based on her willingness to share in the loss. An independent building insurance agent can explain coinsurance penalties.

Commercial property coverage can protect an organization’s business personal property, along with its warehouses, leasehold interests, and business income. A policy typically also affords coverage for a company’s building, itself. A local independent insurance agent, familiar with the concerns of business owners when it comes to evaluating the available options for commercial insurance, can assist them in selecting adequate property coverage based on the insurable value of their company’s building.

In evaluating the insurable value of a business’s building, an experienced independent insurance agent will likely meet with the company’s owner to discuss the nature of their operations, along with the particulars of their organization’s building. An independent insurance agent will likely inquire about the size and location of a building, along with whether it is a high-rise facility, and may also want to know about any elevators in the building, along with details about the heating, cooling, and ventilation systems inside. In assessing the insurable value of a unique business’s building, an agent may also inquire about materials used to service or maintain the building, any temporary structures on the grounds, and whether there are any permanent machines, equipment, or fixtures on site.

By connecting with a seasoned independent business insurance agent, owners of various kinds of companies, from restaurants, to exercise facilities, to pet shops, can discuss their options when it comes to buying commercial insurance. They can find out about the importance of having adequate property coverage for their company, and receive guidance in determining the right insurable value of their organization’s building. With commercial property coverage purchased through a local independent commercial insurance agent, business owners know that in case of damage, or a claim, their building’s value can be preserved.

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Enhanced Insurance is not written by attorneys. If you’re looking for legal advice, you need to contact a lawyer. Further, insurance practices and forms change constantly and are varied from state to state. For definitive answers in your area, contact a local agent.

While the majority of people want an agent involved in their purchase of insurance, many people want to see if they can save money by buying direct from the insurance company. Others want to try a direct quote to make sure the premium they’re now paying through their local agent is fair. If you want a quote for your coverage, click on the competitive quote button on the right side of this page.

Jim operates an insurance agent network called Insurance Partners, aggregating agents in the Midwest for over 25 years. He was National Agent of the Year for Metropolitan in 1993 and Midwest Agent of the Year for Travelers in 2011. He served as a founding board member of the Surplus Lines Association of Minnesota.

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