How to Request an Insurance Appraisal From Normac

Video Transcription: 


Requesting an insurance appraisal proposal from Normac is simple with the Request a Quote form on our website. Simply head to normac.ca and click the Request a Quote button. 


Fill in all of your contact information and property details and click submit. You can also save and come back later if needed. This form is sent directly to our Client Services team who will provide you with a proposal within 24 business hours.


When you receive your proposal, open the fillable PDF, review the document and quote, and fill out the authorization section. We will need the following to proceed:


1) Your signature, 2) the current insurable value of the property, 3) the date you require the report by, which we recommend aligning with your insurance renewal date, 4) site contact information so we can schedule an on-site inspection, 5) and your insurance broker information, if you would like us to send them a copy of the report.


Sign and return the form to us, along with a copy of the building plans. We will confirm receipt of your authorization and begin working on your appraisal right away. And that’s it! Contact us today for a proposal for your insurance appraisal needs.

What is Actual Cash Value?

We have been receiving more and more inquiries for Actual Cash Value reports. While these are not new, there are many who are unfamiliar with what this report is, how we determine value, and why it is being requested. We hope to address all your questions about Actual Cash Value and some things to consider when requesting them from an appraisal firm.

What is Actual Cash Value?

Actual cash value (ACV) is the total cost of reconstruction for a like-for-like substitute minus its depreciation over time. If this value is being requested from an insurer, it may be because the property has been deemed a higher risk and is therefore not eligible for a full replacement cost valuation.

As an appraiser, how do we calculate ACV?

We would arrive at an ACV valuation by first completing a full replacement cost appraisal and then deducting for physical and functional depreciation on the property since it was built. Considerations prior to the deduction would include current standards of material and design, labour, supervision, contractor’s profit and overhead, architect’s plans and specifications, and sales tax. As a general rule, older properties tend to have higher depreciation deductions.

What do we require?

In addition to the architectural blueprints, we will also require a record of all major maintenance and replacement projects completed since date of original construction. The records should include the year of the work done, and if available, the costs incurred.

Why might a broker suggest ACV?

In the past, ACV policies would most often be written because the owner wanted to save money on premiums. Given the hard market we are in, insurers have tightened underwriting guidelines and in turn are writing less policies for properties that they deem as higher risk due to lack of maintenance or being located in a hazard-prone area.  While a full replacement cost valuation might have been available in the past, it may no longer be an option today as insurers look to reduce their risk.

 

Case Study: New Dawn Enterprises Limited v. Northbridge General

On March 17, 2017, a 132-year-old Cape Breton Island building in Nova Scotia had a major sprinkler failure resulting in significant damages to the property.

 

Upon review of the policy set in place at the time, the actual cash value was unclear, and the property owner (New Dawn) believed the ACV was $1.59 million, while the insurer (Northbridge) said $230,000 –  a difference of $1.36 million. The figures were determined by two independent appraisers after the accident.

 

When calculating ACV, the two appraisers first determined “replacement cost new” – what it would cost to rebuild the property in the event of a total loss. However, different approaches were taken to come up with this value. Northbridge had come up with a $6.67 million valuation using the “unit in place method” and New Dawn’s appraiser had used the “quantity survey method” for a $14.58 million valuation. One key difference between the two valuations is that New Dawn’s appraiser had included the value of heating, ventilation, and air conditioning systems, while Northbridge’s appraiser did not.

 

The appraiser for Northbridge then deducted 71% for physical depreciation but 85% for external obsolescence for an ACV of $290,000 (This figure was averaged down to $230,000, taking into account the value for “direct comparison” at $200,000). On the contrary, New Dawn’s appraiser had deducted 72.73% for physical depreciation and 60% for functional obsolescence for an ACV of $1.59 million.

 

To settle the discrepancy, an umpire selected by the two appraisal firms had determined that the actual cash value was $258,000 – a figure that Northbridge was OK with. New Dawn, unhappy with the outcome, took the matter to court and the judge had ruled the umpire’s findings invalid after contacting vendors hired by Northbridge to make a conclusion. A second umpire was to re-assess the actual cash value.

What can I do to protect my property?

What we can learn from the case of New Dawn Enterprises Limited v. Northbridge General, is the importance of having a clearly defined and supportable estimate of ACV before a loss occurs. Hiring an accredited appraiser who specializes in replacement cost and is knowledgeable in depreciation factors over time is the only way to ensure you are adequately protected. In addition,  a plan to consistently maintain the property to a high standard can assist in avoiding an ACV policy in the first place.

 

 

Normac can help with your ACV needs. Having an insurance appraisal done on an annual basis can give you peace of mind, ensuring you have an accurate and agreed upon estimate of ACV before a loss happens. Please contact our Client Services team directly to inquire about a proposal for this kind if report.

 

Reviewing Canada’s Catastrophic 2020

As the hard insurance market ensues into 2021, we take a look at some of the severe weather catastrophes in 2020 that marked Canada’s fourth highest year in insured losses since 1983. On top of the global Covid-19 pandemic, Canada had experienced insured losses to the extent of nearly $2.5 billion. The cyclical nature of the insurance industry means that after a period of severe loss, insurers must increase premiums and impose stricter underwriting guidelines to take on less risk and recoup for losses. The condominium and strata industry in all parts of Canada are at the tail end of it all, with premiums and deductibles on the rise at escalating rates. 

Rain and Snowstorms in Southern Ontario, Quebec, and British Columbia

On January 10, overnight temperatures in Ontario rose to new highs of 10 to 15 degrees Celsius prior to the rainstorm. During the two-day storm, Windsor and London had experienced up to 70 mm of rain and Toronto had recorded 78 mm of rainfall. The Ottawa airport had also experienced 34 mm of rain along with 12 cm of both snow and ice. In Montreal, the rain had begun on January 11, where the city recorded 40 mm of rainfall and 13 cm of ice pellets. On January 31, parts of southern British Columbia had experienced up to 140 mm of rainfall that forced the evacuation of dozens of people. The excessive rain and snowfall had led to overland flooding, seepage, and sewer backups with insured losses totalling nearly $140 million across all three provinces.

Fort McMurray Flooding

On April 26, the Athabasca River saw an alarming escalation in water levels due to a 25-kilometre ice jam, which resulted in major flooding of the downtown Fort McMurray area causing $562 million in insured damageAccording to the Regional Municipality of Wood Buffalo, the flooding had damaged more than 1,200 properties and displaced 13,000 residents by May 3.  At the time of this incident, overland flood coverage had still been relatively new in Canada and was extremely hard to obtain in flood-prone areas. As a result, many homeowners either lacked sufficient coverage or did not have any at all.

Calgary Hailstorm and Central and Southern Alberta Storms
A month after the Fort McMurray flooding, Calgary was now at the center of the fourthlargest insured loss in Canadian history. On June 13, northeast Calgary had experienced hailstones the size of tennis balls at a speed of 80 to 100 kilometres per hour. Over 70,000 properties and vehicles were destroyed by the hailstorm and many are having to deal with high out-of-pocket deductibles to cover for the damage. Between the months of July and August, Central and Southern Alberta had also faced a series of severe weather patterns totalling an additional $221 million. Condominium insurance premiums in Alberta increased by 20% between Q4 2019 and Q4 2020 marking the highest increase across the country. 
Ontario Windstorm
On November 15, a tornado reaching speeds of 135 kilometres per hour had hit Southern and Central Ontario, particularly the Greater Toronto and Hamilton Area, Niagara region, Muskoka region, and the Lake Erie and Lake Ontario shorelines. Pair with heavy downpours that caused lakeside flooding, 540,000 homes reported power outages with debris scattered over cars and buildings. The total insured damage was reported at $87 million, most of which was to personal property. 
Condo and Strata Premiums Remain on the Rise
As local and international catastrophes contribute to the hard market, efforts have been made across the country to make market conditions more attractive for insurers to return to this market, including relief to unit owners themselves. BC’s Finance minister, Selina Robinson, stated that the NDP (New Democratic Party) has started “to chip away at the various component pieces that would help bring insurance rates down … We’ve made a number of changes. There’s more changes coming.” According to the latest “Home Insurance Price Index” released by Lowestrates.ca, from Q4 2019 to Q4 2020, British Columbia had a year-over-year increase of 18%:  

Alberta had a year-over-year increase of 20%: 

Ontario had a year-over-year increase of 8%:

Having Sufficient Coverage and Paying Accurate Premiums

Given the current market conditions, it is critical that your condo or strata corporation is adequately covered in the event of a total loss. We have seen cases where properties have been underinsured, exposing themselves to unnecessary financial risk and liability. At the same time, we have seen properties carrying excessive replacement costs and, as a result, paying too much for insurance. Having an insurance appraisal done by experts trained in local construction costs ensures that you not only have sufficient coverage on your property, but that your premiums are accurate and in line with the market. 

Why We Celebrate Pink Shirt Day

Today, Normac invites you to wear pink and address bullying in an intentional and meaningful way. Leading up to Pink Shirt Day, our staff have been working on a campaign to open the conversation on bullying and help raise funds for programs that counter bullying behaviour. Heres what a few of our team members have to say: 

What is Pink Shirt Day?

Pink Shirt Day is an international movement with Canadian roots. It all started with a small act of kindness. 

 

Travis Price and Davis Sheppard were high school students in a small town in Nova Scotia when they noticed a Grade 9 student being bullied for wearing a pink shirt. Moved by the incident, the pair decided to take a stand by encouraging other students at their school to wear pink in solidarity with the boy who had been bullied. 

 

The response they got was remarkable. Out of 1,000 students attending their school, 850 got on board and wore pink. The movement quickly gained media attention and spread to neighbouring schools and well beyond. Fast forward to years later, pink-themed events are celebrated worldwide as part of anti-bullying initiatives. 

Why Should You Care?

While the majority of preventative measures target bullying in schools, bullying continues well into adulthood. According to a 2020 study 57% of English-speaking older adults in Ontario have been bullied in the last 4 months. Another study identified that 40% of Canadian workers experience bullying on a weekly basis. Add in normal-than-average screen times to the mix due to COVID-19 and you the perfect ecosystem for increased cyberbullying.

Bullying is a widespread issue that we can all take some responsibility for. Thankfully, it is also something we can all take part in ending. As we continue to feel the repercussions of isolation from the COVID-19 pandemic, we need to rely on each other more than ever. 

 

At Normac, workplace wellbeing has long been at the top of our list. While we strive to be the best at what we do through service excellence and quality of performance, we aim to treat our staff just as highly. In a time of remote work, we continue to encourage meaningful interaction and team-building activities within our internal team through various virtual social events. Some of our past events include: a murder mystery escape room, office olympics, and an online Christmas scavenger hunt – including a charcuterie care package sent to all team members across Canada! We also promote self-care among our team through a health & fitness challenge and recently implemented an employee reward and recognition program. This is because we firmly believe that creating a positive, supportive, and healthy work culture can lead to growth opportunities both for our people and our business. 

Team Normac on one of our bi-weekly social Zoom calls celebrating Pink Shirt Day.
Getting Involved on Pink Shirt Day

Join us in taking a stand against bullying. Here are some ways to get you started:  

  • Donate to the Normac Giving Group. Normac is committed to creating an inclusive workplace, and we believe that these skills begin in childhood. 100% of the proceeds go towards charities that cultivate self-esteem and healthy relationships among youth.  
  • Wear pink and share online with the hashtag #PinkShirtDay and #LiftEachOtherUp to help raise awareness.  
  • Buy an official Pink Shirt Day t-shirt at over 80 London Drug stores across Canada. Money made from the sale of Pink Shirt Day t-shirts goes directly to the cause.
  • Above all else, remember to be kind to somebody today. Kindness is always a good place to start, and you just never know what somebody is going through at any given moment.

As we are reminded by the people wearing pink today, a little bit of empathy can go a long way. 

Understanding Total Insurable Value

There are two types of appraisals that measure the value of a property in Canada: a market value appraisal and a replacement cost appraisal. A market value appraisal is useful when applying for a mortgage or selling your home, and it uses a specific valuation approach. A replacement cost appraisal on the other hand, also known as an insurance appraisal, is used for insurance purposes.

 

With an insurance appraisal, the value of a property is defined as its full replacement cost, known to appraisers and brokers as the Total Insurable Value.

TIV Explained

The Total Insurable Value (TIV) is the single most important figure in expressing the cost to fully replace a property in the event of a total loss and includes the cost of materials, labour and professional fees, bylaw and building code revisions, demolition and removal expenses, taxes, and inflation.

 

The process of establishing an accurate TIV starts with hiring a professional insurance appraiser from an experienced, third party firm. The appraiser will inspect and assess the property, identify all the physical elements, materials, and systems, review the architectural blueprints, bylaws, declarations, other relevant legal documents, and determine accurate square footage of various sections of the property. After a comprehensive analysis of all available data, an estimate is made, and a report detailing the property and its TIV is created. Insurance appraisers use a valuation method called the Cost Approach to estimate TIV, which determines the cost to reproduce the property or replace it with an equal substitute.

 

Conversely, market value appraisals use different valuation methods, typically the Income Approach or the Direct Comparison Approach. These market valuation methods consider different things, such as the land value or future income that a property is capable of producing. Using an incorrect valuation method when determining TIV would drastically and negatively impact the estimate for placement of property insurance.

 

The insurance appraisal is used to place property insurance and ensure sufficient coverage. If appraised too high, a condominium corporation or property owner might find themselves paying excess amounts of insurance premiums. If appraised too low, the asset is at high risk of being underinsured in the unfortunate event of a total loss. An experienced appraiser who specializes in replacement costs will consider many factors to achieve an accurate and reliable TIV for their clients.

Considerations to TIV

When determining TIV, there are many physical components that must be evaluated: the entire building structure and mechanical systems, both the hard and soft landscaping, all common elements such as amenity rooms or swimming pools, and the typical finishes of units. 

 

In addition to this, there are other critical considerations that will impact the TIV such as type and quality of materials, location, building code and bylaw review, and the cost of demolition.

Structural, Material, and Labour Considerations

Normac relies on our proprietary costing database and local cost guides to assist our team in determining accurate replacement costs. Our costing algorithms are routinely updated to account for material and labour variances from multiple regions across Canada to produce our estimates and valuation updates. As economic conditions fluctuate, so do these variables. Changes to supply and demand, workforce composition, even international trade can all contribute to significant annual construction cost fluctuations.

Our costing algorithms account for material and labour variances from multiple regions across Canada
Location

While land or market value are not considered for TIV, the location of a property can have a substantial impact on the replacement cost.  Many contractors charge more for their services in remote areas than in cities. As access to materials and labour is typically challenging in remote areas, transportation costs are factored into contractor pricing to account for this.

Demolition and Removal

This is another significant contributor to the total insurable value. Not all appraisers include this in their assessment, but it necessary to remove the existing structure before a rebuild can begin. Demolition and removal in urban areas will cost more due to space limitations, traffic restrictions, and permits that may be required. Furthermore, the type of property and frame type has a major impact on demolition costs. As an example, a concrete high-rise would be significantly more expensive on a square foot basis to demolish than a wood-frame low-rise building.

Size of Unit

The size of the units can also impact costs. Although many condo units in downtown apartments are smaller than what you would find elsewhere, smaller apartments still require all the typical amenities and systems such as appliances, plumbing fixtures, electrical fixtures, and HVAC, etc. This compression of expensive components into a smaller space will increase the cost per foot compared to larger units.

Building Code and Bylaw Reviews

Building code and bylaw reviews are an important consideration in determining TIV and require special knowledge of provincial and municipal requirements for building codes. The national building code sets the bare minimum requirements for construction. However, additional requirements vary by each province and each municipality.

 

Due to these variations, bylaws and building codes must be assessed in detail (on a case-by-case basis or annually) as discrepancies between current standards and older structures can reflect large portions of a building’s full replacement value. In some instances, upgrades can account for up to 20% of the TIV. Major upgrades may include additional handicap access such as ramps or elevators, installation of superior fire protection, and extra parking spaces required for new constructions. The knowledge required to complete these reviews in a competent manner is considerable and should be a top of mind for anyone looking for an insurance appraisal company.

Ask Us

In order to determine a replacement cost that is justifiable, all these factors must be accounted for. Property Owners, Strata and Condominium Corporations, Property Managers, and Insurance Brokers have all come to trust Normac for our comprehensive and detailed replacement cost reports.

Normac’s 2020 Year in Review

This year has truly been an unprecedented time for all of us, calling for changes in the workplace and coping with the strain that COVID-19 has had on our day-to-day lives. The team at Normac remained resilient and continued to offer our clients and partners the same excellent service that our company has grown to be known for. As we countdown the last few days of 2020, here are some highlights from this year.  

Note, you can also view this content as an infographic here.

New Website

To kick off 2020, we launched a new website! The goal was to create something modern and user friendly, that easily communicated who we are and the value we provide. This included new graphics, a simplified layout, and smart forms. We are committed to growth and innovation and therefore are always tweaking the site to improve our client experience.

CCI - South Alberta Luncheon

We were a proud sponsor for the CCI-South Alberta Insurance Luncheon. The seminar covered the current landscape of Alberta’s condo insurance market and best practices for condo corporations to prepare for the hard market. We had been given a few minutes prior to the start of the event to share who we are, and had an amazing time mingling with all attendees!

CCI - Okanagan Evening Educational Seminar

We were a proud presenter for an educational seminar held in the Okanagan region. The seminar covered topics on replacement cost values and the strata property insurance market. As one of the keynote speakers, we had the privilege of speaking to the audience on replacement cost values and the importance of insuring to full replacement cost.

Sandwich Making Event

Our head office banded together to hand out 100 meals in Vancouver’s Downtown Eastside. We spent the day shopping, assembling, and distributing meals to people facing social health and proper housing challenges. It was an eye-opening experience for our team, where we were able to help out and connect with individuals who live with disproportionate levels of poverty and marginalization.

Sandwich Making Event

Our head office banded together to hand out 100 meals in Vancouver’s Downtown Eastside. We spent the day shopping, assembling, and distributing meals to people facing social health and proper housing challenges. It was an eye-opening experience for our team, where we were able to help out and connect with individuals who live with disproportionate levels of poverty and marginalization.

Real Estate Conference in the Sun

We were one of the proud sponsors for the biennial Real Estate Conference in The Sun, this year held in San José del Cabo. A joint PAMA and IREM excursion that hosts property managers and industry partners for educational events, networking, and social activities. A wonderful winter escape from 

the snow!

CCI - Golden Horseshoe Chapter Conference

We were one of the proud sponsors for the CCI-Golden Horseshoe Annual Chapter Conference. The event hosted educational seminars, motivational speakers, and ended with a post reception party at the Courtyard Marriot. We had a great time mingling with industry professionals and thank all those who had dropped by our booth.

CCI - Golden Horseshoe Chapter Conference

We were one of the proud sponsors for the CCI-Golden Horseshoe Annual Chapter Conference. The event hosted educational seminars, motivational speakers, and ended with a post reception party at the Courtyard Marriot. We had a great time mingling with industry professionals and thank all those who had dropped by our booth.

The COVID-19 Pandemic

When it was officially announced that we were in a global pandemic, Normac’s team responded quickly and effectively to ensure no interruption in service to our clients. We enforced strict health and safety protocols for site inspections, moved our teams to work remotely, and set up systems to continue operating business as usual. As an essential service, our biggest priority was maintaining the safety of our clients, staff, and their families, while continuing to deliver exceptional service and reliable valuations.

Virtual Social Events

Pictured here: the Normac team at a virtual murder mystery escape room. 

 

One thing that hasn’t looked the same is our team’s weekly social gatherings. While we are no longer meeting around the beer fridge, we now connect virtually bi-monthly for cocktails, catch ups, and competitions. Our team is made up of some fierce competitors; from trivia to escape rooms and murder mystery experiences, there is no shortage on smack talk.

Virtual Conferences

In September, we sponsored the CAI Virtual Conference followed by the ACR Virtual conference in November. Both were 2-day events hosting a virtual exhibit hall along with several educational seminars held by industry experts on insurance, communications, and property management. It was a great experience for the team given all in-person events are suspended at this time.

Virtual Seminars

With conferences shifting online, so too did educational seminars. We had sponsored a handful of virtual seminars including the “Riding the Insurance Wave” Seminar held by CCI-Golden Horseshoe, CCI – Vancouver’s seminar on Mental Health, as well an Associa-Vancouver seminar on Complicated Stratas. We had also participated in a virtual escape room with PAMA in November!

Holiday Food & Gift Hamper – Adopt A Family

Normac is proud to announce that this holiday season, a family of three will not be hungry. Through the Surrey Adopt a Family program, the Normac team came together to cover the cost of food for a family, along with holiday gifts for their two daughters. We had a delightful time picking out the gifts. In the famous words of Winston Churchill: “From what we get, we can make a living; what we give however, makes a life.”

Normac Christmas Party

With in-person social gatherings not permitted at this time, Normac had moved our annual Christmas Party online! We kicked off the party with a year-end celebratory message from our President, Cameron Carter, followed by an assortment of fun Christmas activities. The celebrations included a Christmas themed trivia & scavenger hunt along with a Secret Santa gift exchange amongst the staff.

Looking Ahead: Normac’s Vision for 2021

As insurance appraisal specialists, we are continuously improving our internal processes to ensure that no update is missed, and all valuations are delivered on time. Combined with the efforts of our dedicated client services team, we aim to pass on cost savings to our clients without compromising on the quality of our work.

Normac has been recognized as an essential service and will continue to provide our services with little to no disruption to our clients. We have adapted to the new norm – implementing new procedures and abiding by the guidelines set out by public health officials. The safety of our staff and clients is of utmost importance. Learn more about our COVID-19 Response.

We sincerely thank all our clients and partners for your trust in Normac and wish you all a happy holiday!

Do Not Be Underinsured

When people ask us why they need an insurance appraisal done every year, or why they need one at all, the number one thing we tell them is that a current appraisal ensures that they have enough insurance coverage in the case of a loss.

 

Do not gamble with the biggest asset in your life – your home.

The Consequences of Being Underinsured

In August of 2019, a three-alarm blaze tore through an apartment complex in Chilliwack. Investigations determined smoke materials started the fire on a fourth-floor balcony. The fire quickly breached the attic space and by the time fire crews arrived, there were flames as high as 30 feet shooting in the sky.

 

Fortunately, no one was injured but 60 families were displaced in the disaster. Over 16 months later, those families are not yet back in their homes, and to make matters worse, they are facing thousands of dollars in special levies. It turns out, the strata was underinsured by $3.2 million. Now, each unit owes between $36,000-$57,000 to make up for the shortfall in coverage.

 

Read more about this story here: https://www.cbc.ca/news/canada/british-columbia/condo-insurance-fire-1.5829511

How Property Insurance Works

When you live in a strata or condominium corporation, a portion of your monthly fees goes towards paying for annual insurance premiums. Insurance policies are valid for a one-year period and the adequacy of the insurance coverage must be reviewed annually. The board must also report on the insurance coverage at each annual general meeting. The strata or condo’s property insurance is intended to cover the structures, common property, landscaping and original standard unit finishes.

Standard unit fixtures and finishes include cabinets and countertops, lighting fixtures, plumbing, natural gas lines, floor, wall, and ceiling coverings among others.

In BC, Alberta, and Ontario it is not a requirement to carry your own personal homeowner’s insurance, only a recommendation. Some corporations may write into their bylaws that owners must carry personal insurance to cover things like high deductibles. Homeowner’s insurance would typically cover your personal, moveable assets and any improvements made to your unit. It is advisable to review your condo’s insurance policy with your insurance broker to determine if additional coverage is required to help protect yourself.

Derek Wubbs, one of the unit owners from the Chilliwack apartment complex, believed that he had sufficient coverage through the strata’s insurance and did not have personal home insurance for his few valuable possessions:

"I was under the belief that paying my strata fees would result in the appropriate building insurance being purchased."

Why You Need an Insurance Appraisal

An insurance appraisal provides an estimate of total replacement cost for a property in the event of a total loss. This is called the Total Insurable Value (TIV) and it is used for placing accurate and sufficient property insurance. All property owners should have an insurance appraisal completed on an annual basis and here are FOUR reasons why:

1. Sufficient Insurance Coverage

An annual insurance appraisal ensures that you have sufficient insurance covered in the case of a loss. The fire in Chilliwack is a worst-case example of what can happen when you are underinsured.

2. Avoid Overpayment on Premiums

We have seen cases of properties carrying excessive replacement costs, and as a result paying too much for insurance. An annual appraisal ensures you are only paying for the insurance you need, not more.

3. Avoid Co-Insurance

When a property does not have a current appraisal, it may be subject to a co-insurance clause that requires the owners to self insure a percentage of the replacement cost. Under this scenario, in addition to the deductible, the owners will be responsible for paying a portion of the reconstruction costs on a total loss or partial loss.

4. Fulfill Your Fiduciary Duty

Finally, an up-to-date appraisal ensures that council or board members are complying with their Strata or Condo Acts, which mandate that the board insure the property for a value equal to total replacement cost. Without an appraisal, the council or board can be found to have failed in their fiduciary duty to the property owners, as was the case in this 2008 Quebec apartment fire. Only an experienced, professional appraiser who specializes in replacement costs should determine the Total Insurable Value.

Hope for the Best, Prepare for the Worst

While we hope that we are never faced with a major disaster, the results of being underinsured can be devastating. There are liability concerns, major financial risk, and significant hardship that can endure for years.

 

Avoid any gamble: An insurance appraisal gives you peace of mind that you and your assets are protected.

Functional Obsolescence: Why Take it Into Account

If you’ve lost power in your condo, it’s hard to imagine doing anything other than walking over to your utility closet, opening up your electrical panel, and flipping a switch in your circuit breaker. But for others living in older buildings, it may not be so easy to get power back. Some residential buildings built 30+ years ago are still equipped with fuse boxes. Fuse boxes are usually located in a common area, such as a hallway or a meter room. And unlike a circuit, a fuse will blow when overheated and will need to be replaced. Time to get strata to call an electrician! On the other hand, the internal mechanism of a circuit breaker will trip and shut off the power when there is a surge of electricity. Nothing gets burnt, so there’s nothing to replace. To restore power, you can simply reset the circuit breaker by flipping the switch back on. This makes a circuit breaker the preferred choice between the two, as it can be used over and over again. A fuse box is an example of functional obsolescence.

What is Functional Obsolescence?

You may have never heard of the term functional obsolescence, but there is a pretty good chance you might have seen it. Ever been to an apartment unit that has three bedrooms but just one bathroom? The textbook definition of functional obsolescence according to the Dictionary of Real Estate Appraisal is “the impairment of functional capacity of a property according to market tastes and standards.” Another common (and outdated) feature found in older properties is single-paned windows. There’s a slim chance you’ll find these in newer buildings, as double-paned (or even triple-paned) windows are now the norm due to their energy-efficient, noise-cancelling, and long-term cost-savings qualities.

An apartment unit with 3 bedrooms but only 1 bathroom is considered functionally obsolete as it does not meet current market expectations.

Functional Obsolescence and Insurance Appraisals

At Normac, our accredited appraisers use a Cost Approach to determine our replacement costs. Estimates are based on replacing a property with an equally desirable substitute, as close as possible to where the property stands now. In other words, we generally assume a like-for-like replacement of all components of the property. However, we must also consider what has changed since the original property was built. There are some circumstances—such as in the case of fuse boxes—where it is safe to assume that existing components within the property will be replaced with a similar alternative, one that is up to current industry and technology standards. Fuse boxes were not designed to deal with today’s electrical loads—they are considered functionally obsolete—and so replacing them with modern circuit breakers in the case of a total loss is a reasonable assumption.

We take functional obsolescence into consideration in this process because in most cases, it will cause the cost per square footage of the property to go down. During an appraisal, we try to estimate how much it would cost to replace the utility in the building rather than how much it would cost to reproduce the exact property.

Copper vs. PEX Plumbing

Copper pipes are: rigid, fire-resistant, recyclable.
PEX pipes are: low cost, bendable, easy to cut.

To illustrate this point, let’s take a look at copper vs. PEX (plastic) piping. Technology often changes the choice of construction materials. Two decades ago, copper piping was the gold standard of plumbing. It is a time-tested water supply line material with its list of pros, but that doesn’t mean that it’s immune to trouble. For one, copper pipes are more likely to break if the water inside freezes. Copper is also a very rigid material, which means it has to be cut and soldered to size, requiring more connections and thus more installation labour. Then there’s the issue of cost. Copper pipes will cost 58 to 68 per cent more to install than PEX pipes.

 

Conversely, due to its plastic nature PEX pipes can be installed 30 to 40 per cent faster than copper pipes. PEX is also known for its durability. When adjusted for pressure and temperature ratings, it has a predicted life expectancy of 50 years. It is no surprise then why many prefer PEX over copper. Given the higher labour, material, and maintenance costs associated with copper, it is simply impractical not to go with PEX instead. This shows how vital it is for your appraiser to have insight on current standards of material and design in order to produce the most accurate Total Insurable Value (TIV) for your property.

 

Qualified appraisers will have the specialized skills and training to determine appropriate costing estimates that take into consideration additional factors such as functional obsolescence, current building practices, and technology improvements. For your peace of mind, leave insurance appraising up to the experts. At Normac, our appraisers keep up to date with construction methods, trends, costs, building codes, bylaw, demolition costs, and provincial Condominium and Property Acts to ensure you are paying for exactly what you need. No more, and no less.

COVID-19: Response Update

COVID19 Normac's Response

To our Normac Clients and Partners,


RE:  NORMAC COVID-19 RESPONSE UPDATE


As Canadian provinces progress to the next step in their phased approaches to mitigate the impacts of COVID-19, Normac continues to take a measured response in ensuring the safety of our team and our clients.

We continue to take extra safety precautions, maintain physical distancing measures, and remain focussed on three things:

  1. Ensuring the safety of our employees and clients
  2. Continuing to provide exceptional service to our clients
  3. Supporting local efforts to limit the spread and impact of COVID-19

As of July 2020, we resumed interior common area site inspections for most jurisdictions in which we operate.   Interior common area site inspections are voluntary; for those clients who would prefer Normac to proceed with information collecting without entering the premises, we can still complete our appraisal reports in a timely and effective fashion.   In order to protect our team and our clients and minimize the risk of disease transmission, we will not be resuming in-suite site inspections and will collect the necessary information using alternative reliable sources.  We will confirm our findings with a designated site contact.

Normac has developed a comprehensive Health & Safety Plan which provides clear guidance on adjusted working practices implemented to mitigate the risks posed by COVID-19.  Appraisers and Property Information Collectors will exercise the utmost caution and follow all hygiene protocols when on-site.  All Normac team members are well versed and supported in the following areas:

  • Physical distancing measures
  • Use of Personal Protective Equipment
  • Enhanced cleaning, sanitization, & disinfection measures

We remain committed to serving our clients to the highest standards and prioritizing your health and safety at all times.  Thank you for your patience and your continued trust in Normac.

Stay safe and keep healthy.


Sincerely,



Cameron Carter

President

Download a copy of this letter.