How To Easily Valuate Replacement Cost For Your Building On A Commercial Policy
When it comes to valuating replacement cost on the building your business occupies whether it be as a tenant or owner on your commercial policy there is a
a simple process. The first process is to confirm the building on the policy is covered for actual cash value or replacement cost. Actual cash value is a form of insurance that pays damages equal to the replacement value of damaged property minus depreciation and Replacement Cost pays the dollar amount needed to replace damaged personal property or dwelling property without deducting for depreciation but limited by the maximum dollar amount shown on the declarations page.
One mistake that most people make in valuating the amount to insure the building their business operates out of by insuring it for the value of how much it will sell for, however it should be insured for the cost to rebuild the property. Another thing to consider when properly looking at the valuation of the building on your commercial insurance policy is the coinsurance clause. Coinsurance is the percentage of the value of the property that a policyholder is required to insure, it is important to understand the coinsurance clause because if the value of the property is not covered adequately the claim payment can be reduced in the event of a loss. An example of coinsurance is usually on a commercial policy there is a 80/20 commercial meaning the coinsurance requirement per policy is 80 %, so if a Building replacement cost value at the time of a claim or loss is 1,000,000 with a 80% coinsurance requirement and the building is insured for only $600,000 but should have $800,000 based on the coinsurance requirement which ultimately results in a lower amount being paid out to repair the building minus the deductible.
Valuating the proper amount of coverage for the building on your commercial policy can be a easily overlooked process in the searching for a commercial policy
To find out if your building is adequately covered on your commercial policy speak with a representative.