Commercial Insurance Valuation

When doing an insurance valuation Added Valuation provides you with a certificate stating the assessed Reinstatement Value, Reinstatement Value Inflationary Provision and Demolition Estimate. It is the total of these three figures which is normally used by our clients to insure their properties. We also provide an Indemnification Depreciated Replacement Cost Value and Indemnification Cost Value Inflationary Provision. Also, upon request, we can supply a Functional Replacement Cost Value and Inflationary Provision.

Below is a brief explanation of the main insurance terminology you need to understand.

Reinstatement Estimate is the estimated cost to rebuild the asset. The rebuild cost includes all costs necessary to meet current Building Act requirements, and covers council and professional fees, and takes into account using current equivalent technology, material and services.

Reinstatement Inflationary Provision is a provision for inflation in the reinstatement cost during the insurance period, claim period, design and consenting period and rebuild period.

Indemnification Depreciated Replacement Cost is the depreciated value of the asset, taking into account the age and condition of the building, and its anticipated life expectancy.

Indemnification Inflationary Provision is a provision for inflation in the reinstatement cost during the insurance period.

Demolition Cost is the cost to clear the site in the event of a loss.

Sum Insured is the sum of the Reinstatement Estimate, Reinstatement Inflationary Provision and Demolition Cost.

Functional Replacement Cost Estimate is the estimated cost required to reinstate all assets to perform similar tasks but under optimum current design and layout conditions with capacity requirements not greater than currently available.

Functional Replacement Cost Inflationary Provision is a provision for inflation in the Functional Replacement Cost during the insurance period, claim period, design and consenting period and rebuild period.

The main reason is to ensure you have your asset adequately insured. However obtaining a Registered Valuers insurance report can also lower your insurance costs. A portion of your insurance premium comprises the Fire Service Levy. Under current regulation the Fire Service Levy for commercial property is charged on the full Sum Insured (i.e. replacement cost plus inflation and demolition) unless there is a Registered Valuation of Indemnity Value no more than two years old, or there is a signed declaration by the owner that the Indemnity Value is fair and reasonable.

When doing an insurance valuation Added Valuation also create a detailed record of your property, including taking accurate measurements of the buildings and where possible site works. We provide this record to you in the form of a report (see example attached). The assessment process as a whole benefits from a registered valuer’s experience and knowledge, as well as ensuring we are well placed to assist you with any future valuation work you may require.

At Added Valuation we have thoroughly consulted with the industry and developed methodologies and reporting which best meets the insurer’s requirements. We provide detailed reports which enable insurers to quote based upon the actual asset being insured, rather than on a worst case scenario basis for unknown risks.

While all good valuation reports should include details on building construction and materials, at Added Valuation we have developed a report which also provides information on building separation distances, fire protection system, reinstatement period estimate, digital building sketch, thorough photographic record and well researched age information. In addition we provide an asset schedule which provides a building and asset value breakdown.

Added Valuation can also assist you with your market valuation or rental assessment requirements at the same time, saving you time and money.

Our valuation fees can be calculated on this fee calculator. Because commercial properties vary significantly, in occasional cases where a property has unusual characteristics we may need to contact you to discuss this fee.

If your property is leased, the full cost of insurance including our valuation fee can, in most cases, be passed on to the tenant(s). At Added Valuation we invoice the client who instructs us, and you can recover the cost from the tenant were applicable.

The insurance valuation is intended to cover the upcoming insurance period, which is assumed to be 12 months. It is common place to index adjust the valuation for the next twelve month period. It is prudent to obtain a valuation at least every second year as the Fire Service Levy for commercial property is charged on the full Sum Insured unless there is a Registered Valuation of Indemnity Value no more than two years old. We recommend undertaking a valuation review at least every 2 years, however, where inflation is running a bit higher, it may be appropriate to review annually.

The Insurance Council recommends as follows: Our general advice would be to obtain updated property valuations at least every two years but make sure that it’s supported with adequate inflation provisions for a 24 month period. If that cannot be done then get an updated valuation very year.

Most of our commercial insurance clients are based in Hastings and Napier. However we have a Registered Valuer in Central Hawkes Bay most weeks, and travel as far south as Dannevirke, and as far north as Wairoa.