Insurance appraisals are completed in order to estimate the new cost of a substitute building. This estimate is often called Replacement Cost New (RCN). It guarantees that the total property has adequate insurance coverage and exhibits the current costs for the subject property area.
Classification of properties often included in appraisal:
- Site Preparation and Foundation Excavation
- Exterior Walls
- Roof Frame and Roof Covering
- Floor Structure
- Interior Partitions and Finishes
- Electrical and Lighting Systems
- Plumbing and Sewerage Systems
- Heating, Ventilating and Air Conditioning
- Site Services to Typical Lot Line
- Demolition and Debris Removal
Classifications of property often excluded in appraisal:
- Furnishings and Equipment, and any personal property of owners or employees
- Chattels or moveable fixtures
- Underground Site Services (beyond the property line of a normal building lot)
- Inventory, Supplies and other Consumables
- Changes due to Building Bylaws and/or Building Code requirements
For insurance placement purposes, insurance premiums are normally based on Replacement Cost and not market value, thus the Cost Approach is best suited for developing an estimate of the Replacement Cost New (RCN). The market and income approaches to value are therefore not applicable to the insurance appraisal assignment.
It is advised that a property have a full insurance appraisal completed every three years. This allows that the most recent changes to construction costs, building codes, and bylaws are incorporated into the appraisal. Properties having remained relatively unchanged will be billed at a considerably lower fee. This is to benefit our current clients since an initial appraisal is a thorough and complex report. An updated report will include all changes since the last inspection and will contribute to the latest insurable value.