How to Determine Accurate Property Values in Today’s Environment

August 12, 2022

Insurance Appraisals

Currently, the biggest challenge many people are facing in our industry is determining accurate property values without overinsuring or underinsuring.

An undesirable confluence of high construction costs – driven by extreme labor shortages and elevated material costs, conflicting messaging from a variety of construction cost indices, prolonged economic uncertainty, and a continuing pattern of natural catastrophes have produced a very challenging environment to determine accurate property valuations.

More than ever before, it is critical to make sure you are not waiting too long between onsite appraisals, staying on top of industry trends, and ensuring that your statements of value are accurate and updated.

So, where do you begin? Here are 8 factors to consider when reviewing property valuation decisions and questions to ask along the way:

1. Size of Exposure & Riskiness of Operation

When your business is risky, it is important to conduct an estimate every 3 to 5 years to audit the materiality.

2. Recent Capital Expenditures

Check on the number and magnitude of renovations and additions.

3. Recent Losses

Losses reveal inaccurate estimates. Make sure to review those loss runs!

4. Change in Costs

Construction costs are a huge factor to consider when determining property values. These fluctuations are driven by both labor and material increases, making current estimates difficult to keep pace with. To learn more about how you can approach insurance appraisals in today’s high-cost environment, click here.

5. Major Changes to Business or Operations

Has COVID resulted in increased vacancy levels? Or have you experienced any other major changes to your business? Make sure to take those into consideration when determining your property values.

6. Adjusting Value Estimates

Ask yourself – are you trending your property values? Which resources are you relying on for this data?

7. Complexity and Scope of Property

Are your exposures unique and complex or do they require a custom approach to estimating the values?

8. Specific Property Condition

Can you measure the actual condition of the property?

Ignoring these factors could put you at risk of being drastically underinsured.

If it’s time for you to revisit your property valuations, the first step to take is conducting an in-depth review with an experienced professional who understands your unique exposures. Our team would be happy to help you.You can also download a PDF to keep on hand with these 8 factors here.