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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Can you rely on a guess, book value, a non-certified person, when it comes to equipment and machinery appraisals, or auctioneer all of whom may have a “hidden agenda”?  The answer is NO”.  Why not?  Relying on a guess, book value, auctioneer, or even a CPA is not accurate. We use methodology of appraisal and are experts in determining machinery and equipment values for every type of equipment and machinery.  You can have confidence in a Certified Appraisal Report prepared by the Official Asset Appraisers (USPAP accredited) because it is accurate, substantiated, defensible, and irrefutable.  Our Appraisal will hold up to the scrutiny of court. (Appraisal Witness) Will Yours?There are 20 typical reasons a business owner, CPA, attorney, lenders, leasing agents, Business Brokers, and others absolutely require the expertise of an independent third party Certified Machinery and Equipment Appraisal prepared by Official Asset Appraisers.

• Business Valuation
• Financing / Loans / Leases
• Buy / Sell Agreements
• Tax Purposes
• Converting From C To S Corp
• Insurable Value
• Cost Segregation
• Estate Planning
• Trust Agreements
• Valuing Goodwill
• Divorce Settlements
• Partnership Dissolution
• Litigation Support 
• Gift Planning
• 1031 Exchanges
• Sarbanes-Oxley
• GASB 34
• Bankruptcy
• Retirement Planning
• Strategic Business Planning

All of these are valid reasons to have your equipment and machinery appraised. Even though the most common reasons are listed above for equipment and machinery appraisals, you should never use any of the most common professionals listed above. Even though you may trust them, they are not the one to appraise your equipment or machinery. Locate a accredited (USPAP) appraiser for your equipment and machinery appraisal before disclosing any confidential or sensitive information. Ask other types of appraisers for references if necessary. Verify that the professional designation is the result of testing and other significant criteria, and requires continuing education. The designation is evidence that the appraiser is a professional and serious about his profession. Contact Official Asset Appraisers for your next equipment or machinery appraisal.