Frequently Asked Questions
Insurance Appraisals FAQs
An insurance appraisal is a specialized report that 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, provided by a professional, 3rd party appraisal firm.
It is critical for both strata and condominium properties, as well as non-condo residential or commercial properties to obtain and maintain an adequate appraisal valuation annually to ensure that owners are insured to full replacement cost value and not under or over insured.
Fluctuating construction costs, changing building codes and municipal bylaws, and other challenges necessitate a professional and experience insurance appraisal firm to determine the replacement cost value of the property.
Not only can an insurance appraisal give you peace of mind, but it also reduces your financial risk and liability.
Sufficient insurance coverage: An annual insurance appraisal ensures that you are sufficiently insured if faced with a major disaster. If you experience a loss and your property is underinsured, the deficit in coverage falls on the property owners to pay out-of-pocket. Read more about this here.
Avoid overpayment on premiums: An accurate replacement cost value ensures you only pay for what you need in insurance premiums, not more. We have seen cases of properties carrying excessive replacement costs, and as a result paying too much for insurance.
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.
Condo Act compliance: Strata and Condo Corporations are required to obtain and maintain insurance on the property that is equal to full replacement cost. This includes the common facilities, and any insurable improvements as outlined in their respective provincial Condominium or Strata Property Acts. The adequacy of the insurance must be reviewed annually.Only a professional insurance appraiser can provide a reliable estimate for full replacement cost.
Building modernization: An accredited and professional appraiser will account for costs to bring older buildings up to current codes. This would include expenses for sprinkler and fire protection systems, additional parking spaces, and handicapped access.
Only a professional, experienced, and accredited insurance appraisal firm should be determining total insurable value. Our team specializes in replacement cost and has over 20 years of experience appraising and producing insurance appraisal reports across Canada. This should be the single most important thing when choosing an appraiser as it will ensure the more accurate and reliable valuation.
An insurance appraisal is very different than a market value appraisal, and certain market value appraisal practices are not relevant to determining replacement costs.
An insurance appraisal uses the Cost Approach whereas a market value appraisal will use the Income or Direct Comparison Approach. The Cost Approach is based on the principle of substitution, where a property will be replaced by an equal or equally desirable substitute. It does not consider exposure time, agreements for sale, options, property listings, historical sales, actual or anticipated public work improvement, easements, rights of way, land use contracts, and the effect on land value in its calculation.
Calculating replacement costs for the purpose of an insurance appraisal requires a specialized calculation. As specialists, Normac will never confuse our valuation methods and can guarantee the most reliable and accurate replacement cost.
Normac’s proprietary costing database relies heavily upon actual construction projects and local costs guides which make our valuations the most reliable and reflective of the communities we serve. To determine Total Insurable Value, we include the following considerations in our replacement cost calculations:
- Demolition + removal
- All materials to rebuild the property
- Labour + professional fees
- Upgrades to current bylaws + regional building codes
- Inflation fluctuation
Read more about this here.
Demolition + site preparation: all costs associated with replacement of excavation, site preparation, and site services.
Building Codes + municipal bylaw updates: estimated additional cost necessary to bring the structures up to current regional Building Code and municipal bylaws, specifically but not exclusive to parking spaces, fire protection, and handicapped access.
Structure: foundation, exterior framing, exterior + interior finishes, roof structure, roof cover, balconies and decks, floor structure, common area finishes, common security systems, fire protection equipment, parking, and elevators.
Residential Structures: all standard finishes and fixture as installed by the developer, including interior framing, floor, ceiling, and wall finishes, vaulted ceilings, baseboards, crown mouldings, lighting fixtures, countertops, cabinets, plumbing, heating, ventilation, cooling, electrical, fireplaces fixtures, and plumbing.
Commercial Structures: main demising walls. For the commercial units of strata-titled properties, structures also include costs for roughed-in electrical, roughed-in plumbing, and HVAC systems if they were included as part of original construction. The interior of the units will be assumed to be unfinished. For the commercial units of non-strata-titled properties, structures include basic plumbing, basic electrical and HVAC systems. The interiors of the units are assumed to have a basic level of finish for the floor, outside walls, and ceilings.
Hard landscaping: pavement and walkways, curbs, retaining walls, handicap ramps, gazebos, fencing, lighting, gates, benches, outdoor pools and outdoor jacuzzis, etc.
Soft landscaping: trees, lawns, shrubs, hedges, gardens, etc.
Common amenities: gym and exercise equipment, indoor pool, sauna, change room, common furniture, televisions, billiard tables, etc.
Assets that are excluded from the appraisal include land, individual unit betterments and improvements, and personal property. Unless otherwise stated in bylaws, improvements and personal belongings is the responsibility of the unit owner under their homeowner’s insurance.
For commercial properties, we can include contents by request. This would typically only include equipment, appliances, and furniture with a combined value equal to $1,000 or more. We will not include or appraise antique or religious items.
- Low-rise and high-rise condominium and apartment buildings
- Townhome developments
- Mixed-use developments
- Bare land properties and Homeowner’s Associations
- Shared facilities
- Government, not-for-profit, and subsidized housing
- Seniors centres
- Places of worship
- Office Towers
- Malls and commercial developments
- Light industrial properties
- Hotels and resorts
- Any other unique property types
- Provide Proposal
- You can request a proposal through our REQUEST A QUOTE portal of our website, or by contacting one of our client services administrators.
- Authorization and Document Collection
Once you receive and review the quote, send back a signed copy to authorize and initiate the next steps.
- Site Inspection
Our client services team will arrange for a site inspection and send a property information collector to conduct the site inspection.
- Review Property Details
Our appraisal team will review all the property details including the bylaws, building plans, as well the property’s regional and municipal building codes for updates.
- Produce Report
Once all details have been reviewed, takeoffs completed and square footage confirmed, the appraisers will calculate the total replacement cost and finalize the report.
- Prepare Updates
In years 2 and 3, our team will send you your updated valuation 60-90 days in advance of your insurance renewal date.
- Program Renewal
You will receive an authorization form to renew your program with your final update. Sign the authorization form and we will take care of the rest. You will receive your new insurance appraisal report 60-90 days before your insurance renewal date.
With a new construction, a replacement cost insurance appraisal should be done by the date of first occupancy.
For an older property, if a current appraisal program is not in place, then one should be obtained as quickly as possible to ensure sufficient insurance coverage.
Every year. This is why Normac offers three-year programs with complimentary updates in year two and three. Having a recent appraisal completed ensures that any fluctuations to construction costs, building codes, and bylaws have been incorporated in the TIV.
We recommend that all our client align their insurance appraisal program effective date with the insurance policy renewal date. This can help streamline accounting, avoid mid-term adjustment fees, and ensure that the insurance broker always has a current valuation at the time of the renewal to secure the proper amount of coverage.
For the first report, this is not always possible, however our Client Services team will work to provide a solution so that the programs can be aligned in subsequent years.
We request the Current Insured Value or Cost Of Construction of all properties that are new to Normac prior to finalizing our appraisals as part of our due diligence. Like any appraiser, we must consider all information that is available to us.
One of the first things a market value appraiser will look for is what the building/unit sold for recently. If they can find a recent sale on the subject property, that is the best possible information they can get. Along with typical building information such as floor areas and quality of interior finish, insurance appraisers should also consider what a building is currently insured for, as well as what it cost to build.
While we conduct our own costing analysis, we have found that having the current insured value will alert us to when a property is under or over insured. We will then double check our estimates to make sure we are confident in them, and when necessary, provide a letter to backup our calculations.
Standard Insurable Unit Descriptions (SIUD) FAQs
SIUD stands for Standard Insurable Unit Description. A Standard Insurable Unit Description is an outline of all the standard finishes and fixtures of a condo unit based on original construction.
The purpose of the description is to provide clarity for condo boards and owners when determining the responsibility of insurance coverage in the case of a partial or total loss. All items listed in the SIUD would be the responsibility of the condo corporation’s insurance to replace; all other upgrades and betterments would be the responsibility of an individual owner’s personal property insurance.
As of January 1, 2020, all condo corporations in Alberta are required to obtain an SIUD by their next insurance renewal. This must be provided to the corporation’s insurance provider and to all the unit owners.
The responsibilities of a bare land condominium are no different from a conventional condominium corporation, such as an apartment building or townhouse complex. If the condominium bylaws state the corporation is responsible for insuring all standard finishes, an SIUD must be created. If the bylaws state that the owners are responsible for reconstruction of their units, then an SIUD would not apply. It is imperative that property mangers review the bylaws to confirm if an SIUD is needed or not.
If an SIUD has been provided by the developer, that SIUD must be used and it cannot be changed or altered.
If there was no SIUD provided by the developer, then a corporation may obtain one from a professional firm such as Normac.
Property managers should review all disclosure documents to confirm if this has been created by the developer or if the condo corporations needs to obtain one.
In their information publication, Service Alberta has determined that an SIUD must be created for each class type of a corporation and it should include all of the following fixtures and finishes:
- floor coverings, wall coverings and ceiling coverings
- electrical lines and fixtures, including lighting fixtures
- plumbing lines and fixtures
- natural gas lines and fixtures
- fixtures with respect to air exchange and temperature control
- walls that do not form the unit’s boundaries, and any windows and doors located in those walls
- cabinets and counter tops
- non-chattel appliances
In one condo corporation, there may be multiple class types. For example, a phased development with both townhomes and apartments would have at least two class types. An SIUD must be created for each class type and state which units fall under which class.
A corporation has three options to adopt an SIUD:
- through a board resolution,
- an ordinary resolution,
- or a special resolution.
If the board approves the SIUD at a board meeting, it must be presented at the following AGM to be approved or amended by ordinary resolution. From here, it must then be registered with the land titles offices.
All approved SIUD’s, either obtained by the corporation or provided by the developer, must be registered with the Land Titles office by using the approved Government Form: http://servicealberta.ca/pdf/ltmanual/CONDOMINIUM_STANDARD_INSURABLE_UNIT_DESCRIPTION.pdf
You can find more information on the Government of Alberta website, here: https://www.alberta.ca/land-titles-overview.aspx
- Request SIUD Proposal
You can request an SIUD proposal through our REQUEST A QUOTE portal of our website, or by contacting one of our client services administrators.
- Authorize Quote
Once you receive and review the quote, send back a signed copy to authorize and initiate the next steps.
- Board to Complete SIUD Questionnaire
The condo board will designate one of their own to inspect a unit and make note of all standard fixtures and finishes. Using the information collected, the board member will submit Normac’s online questionnaire for review, including any necessary building plans. Normac’s expert team will review the submission for completion and accuracy and deliver the outline to the board.
- Review and Adopt SIUD
Once delivered, the condo corporation has the opportunity to review and amend the outline to ensure accuracy and consistency with the corporations bylaws. The SIUD must voted in by the condo corporation at an AGM or SGM.
- Register with Land Titles Office
Once the SIUD is approved by the corporation, the board must complete this form to register the SIUD with the Land Titles Office. http://servicealberta.ca/pdf/ltmanual/CONDOMINIUM_STANDARD_INSURABLE_UNIT_DESCRIPTION.pdf
In some instances, the board and condo corporation may choose to amend the standard finishes and fixtures listed in the SIUD Outline. This could be for several reasons, like if the unit inspected did not have all standard finishes, or if they would like to add further clarity.
After the outline is created, the SIUD must be voted in by the corporation and it must be registered with the Land Titles Offices in order for it to comply the Alberta Condominium Act.
A standard insurance unit description must account for the original fixtures and finishes of all units as a baseline. If the condominium bylaws states that it includes betterments, a separate document must be created to account for all owner upgrades.