A professional replacement cost valuation ensures that a property owner is correctly covered but it also serves as an invaluable marketing tool for the insurance industry.
What constitutes a quality insurance valuation?
Why not just ask a building contractor or developer for an estimate on a suitable sum insured, or consult a renowned construction guide?
1. The person signing off on the valuation report must be a qualified and registered valuer, accredited by the SACPVP and holding adequate professional indemnity cover. Why entrust such a vital matter to someone who cannot be held accountable?
2. The valuation report starts off with a description of the property, its improvements, location and infrastructure.
3. It is in the interest of both the insurer and the insured for the report to also indicate risk and maintenance observations by the valuer, for example, the absence of firefighting equipment and security installations or the property's general state of repair. In some cases, the valuer might even recommend that a risk surveyor or structural engineer be consulted additionally.
4. An itemised breakdown of all improvements serves to demonstrate how the valuer arrived at the total estimated replacement cost. Included in the replacement cost calculation are the current building rates, demolition costs, rubble removal, professional fees and additional building services. These elements are all affected by the specific building design, geographic location, underlying topography and other attributes.)
5. A valuation should also indicate the anticipated escalation of costs during the insurance period and during the course of the rebuilding process based on the prevailing economic indicators.
6. Where a sectional title complex is being valued, it is essential that a Schedule of Replacement Values (SRV) is provided together with the valuation report. This indicates the floor area of each registered section and its undivided share in the common property. It also serves to establish each owner's participation in the body corporate’s total sum insured.
7. An ample number of photographs of the buildings, site works, any maintenance issues and insurance risks should be included to support the replacement cost estimate.
More often than not, property owners only realise at the last minute that their insurance policy is up for renewal and that a professional valuation may be useful. Therefore, it is important that a valuer conducts a site inspection on short notice and deliver the report in a quick turnaround time.
Other blogs you may find interesting: How we assess a building's replacement value and Why it is wrong to insure the market value of your house.