Understanding the value of your business property is essential for various reasons. It isn’t just a number you can use when it’s time to sell your property. Property insurance valuation is also necessary to ensure you have the appropriate coverage if disaster strikes your business. The following are some of the most common types of valuation you should pursue.
Replacement Cost
Most people prefer replacement costs for their insurance valuation. This process ensures you have the amount of coverage necessary to repair or replace your structure if it suffers damage. This value doesn’t include the value of the land and is determined based on the actual cost of materials and labor to reconstruct or repair the building. Depreciation isn’t a factor in this type of valuation.
Actual Cash Value
This method of insurance valuation works similarly to replacement costs. It factors in the actual cost of labor and materials to restore your building if disaster strikes. The primary difference is this type of valuation includes depreciation. The older your building is, the lower your insurance coverage will cost. This option is often the better choice for businesses that don’t need to restore their structure the same as it was before the damage and can make adjustments to lower their costs.
Functional Replacement Cost
A third common insurance valuation method is functional replacement cost. This option is the least popular of the three but can still have its uses. If you could build a functional replacement structure for a lower cost than your current building, functional replacement cost valuations can be the ideal solution to give you more flexibility and reduce your insurance rates.
If you need an insurance valuation on your business property, visit the B. Riley Financial, Inc. website to learn more about their services
