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.
construction cost appraisal

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Appraiser for rebuilding cost of your business building is needed now before disaster strikes leaving your business at risk. In addition to typical risks of theft and fire, natural disaster risks that can cripple any type of business prevail. It is essential that business owners have their buildings appraised by an accredited appraiser that is compliant with the new 2008 USPAP laws and then update their policies often to include improvements, major purchases and increased building costs, according to the Insurance Information Institute (I.I.I.).

Official Asset Appraisers have found that most business owners don’t have the right type of insurance and have vague gaps in their coverage. As a Business owner you should ask yourself these questions;
1. Do we have the right kind of insurance to rebuild our building and replace all of our equipment and personal property? (Your Business Personal Property includes these categories:

• Furniture and Fixtures,
• Equipment, machines, computers,
• Inventory: raw materials, merchandise, work in-progress,
• Personal property of your employees,

* If you or a tenant have made improvements on the building, were the improvement values added to the policy?)

2. What is the real construction cost and replacement of my equipment, if I had a total loss today?

3. If I as a business owner do not have enough insurance on my business building to rebuild and continue my business, what are my options?

• Borrow,
• Build smaller,
• Take the insurance money and quit the business.***

***If you are under insured by 1/2 (or any percentage) and decide to not rebuild, the insurance company can arbitrarily decide that the cash value you receive is not the insured amount, BUT, 1/2 (or any percentage) the amount your building is under insured!

4. If my business had a disaster does my insurance policy provide for demolition and clean up? Is this paid out of the general rebuild fund? NO! Demolition and clean up is usually not addressed in the insurance policy! Therefore YOU pay for the clean up and disposal of the demolished building out of your pocket.

5. If I have replacement cost insurance, doesn’t that cover all I will need? NO! NO! NO!

Solution:
Get an accredited USPAP compliant appraiser to find out what the real construction cost of your business building will be today! Have Official Asset Appraisers appraise for the total amount to open your doors and continue business after a disaster so that you can adjust your insurance coverage. A desktop appraisal or “guesstimate” of square footage price is a tremendous risk. Only an experienced appraiser that can certify your appraisal should be used for this task. Official Asset Appraisers have 29 years experience as Commercial General Contractor, Graduate of Drafting and Engineering and appraisals. These qualifications will insure that you can circumvent the problem of SURPRISE! … “You have a disaster AND you don’t have the building insured for enough to rebuild!” … Every type of appraisals can be accomplished by Official Asset Appraisers! If you have questions, give us a call.

Phone 480 326 3907.

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