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Insurance Appraisals 101

What is it? Why do I need it? How do I get it?

WHAT IS AN INSURANCE APPRAISAL?

A specialized report that provides an estimate for replacement cost value of a property. Property owners use this appraisal to determine their insurance coverage in the case of a total loss. This is different from a market appraisal. 

DO I NEED ONE?

Yes, all properties should have an accurate and current replacement cost valuation provided by a professional insurance appraisal firm.  Strata and Condo Corporations are specifically required to obtain and maintain full replacement cost insurance on the building, 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 appraisal company can ensure compliance with this legal obligation.    

Commercial and non-condo properties should also annually obtain an adequate appraisal valuation;  it is critical to ensure that owners are insured to full replacement cost value.   Fluctuating construction costs, changing building codes and municipal bylaws, and other challenges necessitate a professional 3rd party insurance appraisal firm to determine the replacement cost value of the property.  A sufficient TIV and professional appraisal can provide confidence in the operational resiliency of commercial building or asset in the event of a catastrophic loss.

OTHER BENEFITS?

Peace of mind: rest assured that you have sufficient coverage if faced with a major disaster.

Better premiums + increased coverage: An accurate replacement cost value ensures you only pay what you need to on insurance premiums. Plus, having a recent insurance appraisal may allow for more flexible terms with your insurance broker.

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 systems, additional parking spaces, and handicapped access. 

HOW DO YOU DETERMINE TIV? 

Normac uses local cost guides and our own in house costing research to determine TIV. TIV varies based on location and is broken down by: 

  • Demolition + removal
  • Materials to rebuild 
  • Labour and professional fees
  • Upgrade to current bylaws and building codes
  • Taxes
  • Inflation fluctuation

WHAT IS INCLUDED?

Structure: foundation, frame, exterior + interior walls, roofing, interior finished, HVAC, electrical, plumbing, lighting, fire protection equipments, elevators, parking, and more

Hard landscaping: pavement and walkways, curbs, retaining walls, fencing, lighting, patios, underground services such as water, sewer, drainage, electrical, and more

Soft landscaping: grass, shrubs, trees, irrigation systems

Common elements: swimming pools, jacuzzis, security systems, handicap lifts, etc

Typical finishings: flooring, ceiling, countertops, cabinets, appliances, baseboards and crown mouldings, lighting fixtures, vaulted ceilings, plumbing fixtures, etc

Furnishing + Equipment: all common property including furnishings and equipment are included, such as exercise machines, televisions, billiards tables, etc

WHAT ISN’T INCLUDED?

Unless otherwise stated in bylaws, personal belongings and contents are not included in the appraisal. This is the responsibility of the owner under their home insurance. 

WHAT KIND OF PROPERTIES DO YOU APPRAISE?

  • Lowrise and highrise apartment buildings
  • Townhouse complexes
  • Mixed use developments
  • Light industrial buildings 
  • Bareland properties
  • Home owner’s associations
  • Housing Co-operatives
  • Government + Senior’s housing
  • Places of worship
  • Malls and commercial developments
  • Hotels and resorts
  • And more!

WHAT IS THE IA PROCESS?

  • Send proposal and receive authorization
  • Arrange and conduct a site inspection
  • Review building code, bylaw, and property details
  • Estimate replacement cost and produce report
  • Provide updates for year 2 and year 3

WHEN SHOULD AN APPRAISAL BE DONE?

With a new construction, a replacement cost insurance appraisal should be done by the date of first occupancy.

HOW OFTEN SHOULD A FULL APPRAISAL BE DONE?

Every year. This is why Normac offers three year programs with free 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.

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