Are You Covered? | Insuring Your Property to Value | by Normac

strata property insurance

We never like to think that a disaster might befall us, but what if it did? Having full insurance coverage for your property is essential to getting your life back to normal. Getting a proper valuation requires the expertise of a professional appraiser with knowledge of the local market.

Keeping a strata property’s valuation up to date is essential, and one of the keys to protecting it is by trusting an experienced appraiser to provide a reliable, comprehensive insurance valuation. A Total Insurable Value (TIV) appraisal will guarantee that the entire property is insured to a dollar amount that will cover owners in the event of major damage or loss. The Strata Property Act requires a strata corporation to get and maintain full replacement cost insurance on the building, the common facilities and any insurable improvements and the corporation must review the adequacy of this insurance on an annual basis.

Insurance Appraisals

Insurance appraisals are highly specialized reports that start with a site inspection followed by a property analysis to determine the calculation of supportable estimates for replacement costs. Qualified appraisers are able to produce reliable estimates based on expertise acquired through extensive training and experience. Moreover, experienced appraisers make their estimates based on an analysis of the current environment, and do not rely on third party software based outside the region or use generic information to determine their estimates.

The appraiser will have certain specialized skills to determine appropriate costing. There are several additional considerations to complete an effective insurance appraisal. The importance of local bylaw reviews cannot be overstated as they are crucial to the appraisal process. In the event of a disaster, current municipal bylaws must be adhered to when rebuilding the property. Consequently, an appraiser’s review of the property must include an assessment of the current property composition compared to the current standards and regulations of the specific municipality and province in which it is located. Any code requirements that are not currently met are accounted for in the replacement cost estimate.

An experienced appraiser also considers current building practices and technological improvements which have become standard in new buildings. As a general rule appraisers assume a like-for-like replacement of all components of the property whenever possible. However, there are some circumstances where appraisers assume that the existing subcomponents within a property will be replaced with something that is similar but up to current standards. In these situations, the as-built construction practices are considered obsolete, and modern construction methodology and materials is assumed in the appraisal value.

Demolition and Removal Costs

Accounting for demolition and removal costs is another important consideration in the appraisal process. This can prove to be quite costly and differs greatly by property type. Strata corporations should be wary of the misused straight percentage calculation to estimate demolition and removal costs. A straight percentage often proves to be overly simplistic and ineffective in the event of major reconstruction.

Without the review and knowledge of such additional costs and considerations, there is potential for significant exposure, rendering the strata corporation liable for the difference.

An insurance appraisal requires a unique skill set, and has specific demands that go beyond a house or commercial property review performed for a bank. Keeping up to date in construction methods, costs, building codes, bylaws, demolition, and the Strata Property Act are critical to providing a reliable TIV estimate. For this reason property owners are best served when they use appraisers who do this type of work full time.

A Correct Insurance Appraisal Can Save You a Lot of Money

Property is, for most people, their most valuable asset. Insurance brokers and underwriters understand the details and implications of property replacement estimates. Having a reliable, comprehensive insurance appraisal to protect your property is of the utmost importance. When facing major repairs, a correctly performed insurance appraisal can save the owners millions of dollars, while being underinsured means a shortfall in property damage replacement costs will leave the strata corporation, and ultimately owners, to pay the difference. In this light, the best insurance a property owner can have is an expertly prepared appraisal that will leave you with peace of mind.

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