More frequently than ever, underwriters are questioning the validity of values for fixed assets, such as buildings, heavy machinery, and company vehicles. When underwriters are dissatisfied with valuations, they usually impose coverage restrictions. Some underwriters may even refuse to offer any coverage unless the values are adjusted to their satisfaction.

Insurance carriers use third-party data sources and internal tools to capture and assess values. However, relying solely on these tools without vetting the output can lead to negative results for insureds. USI uses the same tools as insurance carriers, but also conducts a thorough review based on the actual circumstances of a client’s individual properties. This helps secure maximum coverage at the time of loss while minimizing premium expenses.

Industry benchmarks can also provide valuable reference points for property owners to assess whether their valuations are accurate and competitive. For example, a comparative analysis of price-per-square-foot with similar properties in the same area, as well as trends over time, can help determine appropriate pricing. Using the percent of building value to evaluate reported content values is another effective benchmark for identifying the appropriate insurance coverage and replacement costs. Business income values as a percent of annual revenue can be used for specific occupancies to evaluate limit adequacy.

Regular property valuations are essential for maintaining up-to-date records that reflect the true value of assets. Organizations should:

• Schedule periodic appraisals — Engage professional appraisers to conduct valuations at regular intervals. This ensures that the property’s replacement cost is accurately captured over time.
• Include all assets — Make sure the valuation covers all assets, including buildings, equipment, and inventory. This comprehensive approach provides a complete picture of the property’s worth.

Accurate and thorough documentation is crucial for substantiating claims. Organizations should:

• Keep purchase records — Document the purchase date, price, and any related expenses for all property. Capture serial numbers and/or model numbers for key pieces of equipment.
• Record improvements — Maintain records of any upgrades or improvements made to the property, including costs and dates of completion.
• Use photographic evidence — Regularly photograph and video the property and its condition. This visual documentation can be invaluable when filing a claim.

A deep understanding of the insurance policy is essential to ensure coverage aligns with the property’s value. Organizations should:

• Watch out for restrictive wording — Because insurance carriers have paid out massive sums for catastrophes in recent years, they will scrutinize the data reported in your statement of values (SOV) very closely. They may also impose restrictive policy language, which can create shortfalls in property claim recoveries. The most severe policy changes go beyond coinsurance requirements to margin clauses and occurrence limits of liability.
• Review policy details — Regularly review the insurance policy and its endorsements to understand coverage limits, exclusions, and conditions.
• Adjust coverage limits — Ensure that policy limits are adequate to cover the current value of the property, including any recent improvements or acquisitions.
• Consider endorsements — Evaluate the need for additional endorsements or riders to cover specific risks or high-value items not included in the standard policy.

Leveraging the expertise of experienced professionals can enhance the accuracy of valuations and the effectiveness of claims. Organizations should:

• Use an independent third-party appraiser — When the insurer and insured can’t agree on values, an approved independent third-party appraiser can be utilized to determine correct values. This option can eliminate disputes over valuation between underwriters and the insured, and reduce the chances of punitive language being added to the policy by the underwriter.
• Engage claim consultants — Work with claim consultants who can offer expert advice on maximizing claim recovery.
• Seek the best expertise — Insurance professionals can help navigate complex claims and promote compliance with policy terms. Discuss specific building constructions with local contractors to determine if valuations are accurate.