Remember inflation? Big increases in the real cost of construction and commercial property repair over the past year are making underinsurance a growing problem for business owners. It is more of a problem during times of inflation because the value of the items insured rises over the course of the policy term. Generally that’s what insurers will pay, even if the value has gone up and in end the insurance payment won’t cover the loss.
The cost of building commercial and industrial buildings in the US has increased 11 percent in the past 12 months, according to industry sources.
The cause in these unprecedented increases is the prices of steel, concrete, petroleum products and shipping. People automatically think fuel when they read petroleum, but what they forget is that there is a multitude of products that are made from oil. Adding more pressure to the cost of construction materials is China consuming more and more commodities, allowing increased demand for commodities, to work on the marketplace inflation.
So if you are a property insurance buyer and used a year-old statement of values for their August 1st renewals, you could be underinsured by as much as 11 to 18 percent.

Inflation is only one level of the underinsurance problem. In this hard market, property insurance underwriters have been strict in penalizing insurance owners whose insurable values are understated. A most common penalty is to restrict payment on a claim to the amount reported on the statement of values. Another way they penalize insurance buyers is by a coinsurance clause that is included in most policies. When a claim exceeds the insurable values, loss payments are calculated by the following formula: the amount on the company’s statement of values is divided by the actual value at the time of the loss. The ratio is then applied to the loss amount, and the insurer pays the resulting amount. The balance of the loss is the responsibility of the coinsurer: i.e., the insurance buyer.
What can be done about it? We recommend several strategies.
§ First, exercise extra caution in the preparation of your statement of
values. (current appraisal)
§ Consider getting updated appraisals, with your largest facility and then working your Way through the list.
§ Consider getting business interruption values prepared and certified by a CPA, from an accredited Appraiser who specializes in appraisals for business interruption claims for insurance buyers. (Business interruption values are one of the components of a list of insured values; the other is physical property values.)
§ Make sure your loss prevention appraisals are accurate and up to date.
§ Remember the first rule of underwriting: if there is a gap between the information your Underwriter needs and what you provide, the underwriter will fill the gap with pictures of dead presidents – and you will be expected to provide those pictures.
With real construction costs rising, it is more crucial than ever to have an accurate –  property insurance values. The underwriters look at the amount of information you supply them with, as how well informed you are, to establish your cost of insurance.

We can provide all of these services to you with the utmost of experience and professionalism.
Contact us for your business solutions. Whether it be forensic appraisals, or as simple as equipment or personal property, or as complicated as a business valuation with FASB 143 appraisal. We know what we are doing where as other think they do but cost you more.
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There are so many different variables to the problem of demolition that you may have for your particular demolition situation, that this issue can be nearly impossible to address.
There are a wide variety of questions involved with demolition to give a good answer. Are there environmental issues? Asbestos?  Buried fuel tanks?  Chemical spills or even tar run-off from burned tires?  What are you intending to do with the debris? Can any portion of the foundation remain or will you require everything to be removed? Is there anything salvageable that might have value and offset the costs? What is the construction method? Does demolition include removal of asphalt or just the building? Is site restoration part of the project?
The demolition of certain parts of a building and equipment does not necessarily involve destroying the entire structure.  Sometimes, the exterior/interior walls, floors, equipment and ceilings may not be damaged.
There are also many issues in real demolition costs that you really have to take them on one at a time. You can’t see these demolition costs when you are thinking about purchasing insurance for your building, but you might want to consider some of the issues described in this article to keep you aware of demolition costs as part of your real construction cost.
The cost of most demolition permits is relatively inexpensive running between $15 and $25. Sometimes, there are additional fees in demolition for things such as inspection of the power disconnection and to cap off water and sewer lines at the property.
In addition, a permit for encroachment may be necessary to abandon the sewer line at the main.   A licensed plumbing contractor will be needed for this.
Municipal fees may be collected if the property will be developed in a timely manner.  The water will have to be shut off at the property boundary.  However, if the property will not be developed after demolition, you can shut off the water at the main.
How does this apply to you?  You need Official Asset Appraisers to examine your particular situation to determine the demolition costs which you will require in defining your real construction costs.  Otherwise, you could be spending too much money on premiums, or not enough. Either way these issues will be covered when you call Official Asset Appraisers to answer your questions, and appraise your building for the Real Construction Cost.
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