The Impact and Importance of Insurance Valuation of Business Property
The intention of purchasing or renewing commercial property insurance is immediately followed by the obligation of obtaining correct property Insurance Valuations in Melbourne .
An ITV or Insurance to Valuation calculation is what makes the difference between benefiting from adequate property protection and paying coinsurance penalties (a penalty imposed by the insurance provider for underreporting the value of the commercial property) in the event of property losses.
"An ITV refers to the approximation of the full cost of replacing or restoring the insured property."
There are multiple reasons why an ITV could end up inaccurate, for example, ineffective property valuation methods, intentional underestimation of costs or even inflation. Today, about 75% of commercial properties are estimated to be underinsured by a staggering 40%.
Thereby necessitating the need for accurate insurance valuations on commercial properties. To further understand the importance of ITV and the benefits of accurate calculations - continue reading !
Different Approaches to Insurance Valuations Explained :
A truly accurate Insurance Valuation will be able to estimate the closest valuation possible which equals the difference between the amount of insurance coverage on a commercial property and the estimated value of the property itself. Either way, there are values assigned to a property that must also be given due consideration.
These values include ;
[A] Market Value :
This is an estimation of the value at which a property can be sold in the current real estate market. It is determined by factors such as lot size, condition of the building and curb appeal.
[B] Assessed Value :
This estimation is generated by the local municipality to determine local property taxes.
[C] Replacement Value :
This is an estimation of the current cost of replacing or rebuilding a property. It is determined by the factors of the reconstruction as in cost of labour, material, debris removal and building permits.
A proper insurance to valuation estimate is determined by the Replacement Value. For more accurate estimations of the RV other aspects must also be factored in, for instance, third-party appraisal, fixed assets adjusted for inflation and so on.
Factors that Impact the Value of a Property :
Besides having the Replacement Value guiding the ITV estimation, other factors are also due for consideration ;
The Benefits of Accurate Property Insurance Valuation :
Obtaining an accurate or near-to-accurate property insurance valuation can be immensely beneficial in mitigating risk and recouping the investment.
Some of its many benefits are as follows ;
 It will grant the property owner a higher Insurance rating with the insurance provider.
 It boosts the insurer's confidence in the valuation of the property.
 It establishes a benchmark that substantiates proof of loss.
 It opens doors to properties already owned which was not previously discovered.
 Extra expenses that could otherwise be avoided would be revealed.
 A proper property evaluation can be referred to for all future estimations.
An accurate property valuation is valuable data that can offer several benefits to the business owner who owns the commercial property. Undervaluation can have a significant effect on any business whether it is Rural & Agribusiness in Bendigo or a commercial rental property.