Rebuild value appraisal: necessity or expense?


Jan 2023

We are often asked whether having buildings appraised is necessary for insurance purposes and what effect it has precisely to choose to do so or not.

The amount of the claim payment depends in part on the insured amount stated in the policy. Often the rebuild or demolition value. In order to ensure that the claim payment covers the actual damage, a proper adjustment is necessary. There are two options for this: the amount can be determined either yourself or by an appraiser. What are the advantages and disadvantages?

Determining your own insured amount

When entering into an insurance policy, the policyholder can choose to determine the insured value himself. The insurer is not involved and the insured amount is then established unilaterally.

The insured amount is included in the policy and the premium is calculated on this basis. Saves having valuation reports drawn up but the consequences of a wrongly chosen insured amount are then also at your own expense. In case of damage, the policyholder has to prove the value of the insured interest.

If the insured amount is determined by yourself, this increases the risk of underinsurance. If afterwards it turns out that the value for which the building is insured is lower than the actual value, this will be at your own expense.

Appraisal prevents underinsurance

With a reconstruction value appraisal, the insured amount is determined by an appraiser. This amount is then indexed annually so that the equal trend with the increase in value of the property.

With an appraisal by appraiser, the policyholder and insurer have agreed that the sum insured is equal to the value of the insured interest. With the policy with appraisal, the insured no longer needs to prove the value in the event of a claim, because that value is already established in the policy.

The advantage of appraisal is that there is no underinsurance because agreement on the rebuilding value is reached in advance. The premise here is that in the event of damage, full compensation is received.

Performing an appraisal is an investment that creates business continuity and is also financially beneficial in the long run.

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