Defining the Scope of Your Property Insurance Appraisal Project: Key Questions to Answer

by Ryan Tate, Centurisk Director, U.S. East

When it comes to risk management and property insurance, having a clear understanding of the scope of your property insurance appraisal project is essential. Whether you’re a seasoned professional or new to the process, gathering the right information upfront can help streamline the appraisal process, ensure you receive a more accurate cost estimate, and make certain you capture all the property data you need. To kickstart your next project, here are key questions to answer and how they can help your valuation partner develop a valuation plan specialized to your needs:

1. What are the total number of structures to appraise?

Knowing how many structures are in your organization’s property portfolio is important for getting your appraisal project off on the right foot. Most valuation contracts are set up on a cost-per-building basis, calculating the final estimate based on building totals and several other factors. Your property insurance valuation company will also use that building quantity to determine where your project fits into their overall appraisal schedule. More buildings may require more time or even increased staff. A smaller number of buildings may mean your project can be slotted neatly between two already-booked projects. Effective planning is key.

2. What are your buildings’ valuation thresholds, if there are any?

Your risk pool or other insurer may have set “valuation thresholds” for the buildings it insures, or you may wish to set these thresholds yourself. While in an ideal world, every organization would have the budget to ensure all buildings were valued with detailed, on-site valuations, that isn’t always feasible. That’s where valuation thresholds come in.

A valuation threshold sets a limit to the amount of money a building must be worth to receive an on-site valuation at a particular time. For example, you might choose to value all buildings estimated over $100,000 … or $500,000… or $1 million, and then trend the rest. Or you may choose to appraise all buildings over a specific threshold one year, and all buildings over another lower threshold the next. Valuation thresholds help you prioritize, determining the extent of the project and associated costs.

Different thresholds may also impact appraisal requirements and pricing. A larger building or one with specialized equipment functionality may require more time and expertise than a smaller building. For organizations that do not have set valuation thresholds, your trusted valuation partner should be able to work with you to determine a smart valuation plan for your organization.

3. What insurance policy requirements and data modeling components do you need?

Different insurance policies have different requirements for valuations and the data that’s collected, such as valuation thresholds and coverage layers. Knowing your policy’s appraisal requirements helps ensure you remain compliant and lets you tailor your valuation project to meet specific policy needs.

Your insurance company may also require or recommend specific data modeling details and COPE (Construction Occupancy Protection and Exposure) data to ensure you receive an accurate assessment and the right amount of coverage. This could include details for catastrophe and convective storm modeling, information on a building’s last electrical, plumbing, and roof upgrades, or its distance to fire station. By knowing the data your insurance company is looking for, you’ll be able to gather the information you need. By having complete data, you can build greater trust with your insurer. And that can help you secure better ratings and rates!

4. When do you need the project to be completed?

While often the answer is “as soon as possible,” having a realistic idea of when your appraisal project needs to be finished and communicating that with your appraisal company can get things off to a smooth start. In fact, having an appraisal plan in place well in advance of when you might need your appraisal reports can help you avoid potential challenges meeting your deadline.

5. Where did your current data come from and how confident are you it’s accurate?

When performing on-site appraisals, your property valuation partner should verify any existing appraisal data for your properties. By sharing with them where the data came from, how it was collected and when, this will help your partner better document any informational discrepancies and fill in gaps along the way.

6. Does your SOV contain any structures on the national, state, or local historic registries?

All buildings are not necessarily made equal; historic structures often require specialized attention during a valuation, because in the case of a loss event, historic features may need to be recreated in like kind, methods, and materials, leveraging the talents of artisans skilled in the building methods of the past. When you identify the historic structures in your organization’s property portfolio and share that with your valuation partner, that lets them know which properties should be appraised using reproduction cost values instead of replacement costs (you can read more about the difference here) and pinpoint any other special appraisal considerations.

7. Do you have any unique structures like water/wastewater treatment plants?

These unique facilities require specialized valuation knowledge, and sometimes will be valued as one building entry on an SOV. That, however, can pose problems when a single part of the complex process experiences a loss. It becomes difficult for the insurance company to know how to reimburse for that facility, when only a part of it needs to be repaired/reconstructed. At Centurisk, we have experts in water/wastewater treatment plant valuations who can break down the valuation to the plant’s most important operations, creating a more thorough and accurate valuation. By knowing these facilities are a part of your SOV, scheduling the right expertise for the right job becomes a lot more efficient.

8. What are your requirements for building photos?

Are there specific images you need, in order to document certain property features? By clarifying photo requirements with your insurance valuation firm before your appraisal, you make sure you get the comprehensive documentation you need. This can be particularly important for historical or otherwise unique structures. At Centurisk, we typically include at least one photo of each building for easy reference. However multiple photos can be provided at the customer’s request.

9. In what order will properties be appraised and do you have any regional preferences?

When things like travel expenses come into play, how you prioritize your building appraisals can make a difference in costs. Generally, we at Centurisk try to schedule appraisals for our clients based on region, to save our customers on excess travel, as well as optimize our staff resources. But sometimes an organization might have specific reasons for wanting buildings to be appraised in a non-geographic sequence and knowing that up front helps us create the most effective valuation plans.

10. What values do you need in your property reporting and are there any exclusions?

Thinking about your reporting now can help make sure that you get all the information you need to share later. In particular, it’s smart to specify your valuation preferences up front, like whether you need to report on replacement cost values or replacement cost less any exclusions. This will allow your property insurance valuation partner to tailor the final reporting to your needs.

By answering these questions upfront, you can streamline the property insurance appraisal process, receive more accurate project quotes, and allocate resources effectively. Clear communication and thorough preparation pave the way for successful insurance valuation projects, ensuring both more comprehensive coverage and risk management strategies tailored to your specific needs.

About the Author

Ryan Tate resides in Pittsburgh, PA with his wife Kelly and two children, Raegan and Maddix. When he’s not acting as regional director for Centurisk, he spends most of his free time coaching baseball, softball, basketball and soccer.

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