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Insurable Value Appraisals
Cambridge Partners has appraised business assets for insurance purposes
for Fortune 1000 companies as well as small and middle-market firms. For nearly twenty
years we have been appraising all types of equipment, machinery
and other personal property. We have appraised billions of dollars
worth of personal property assets.
Clients engage Cambridge Partners in order to determine the insurable replacement value of their
real and personal property assets. Our valuations help establish an independent value
for our clients buildings and contents. The results of our valuations are generally used by our clients
and their insurance carriers (brokers) in order to determine the proper amount of insurance to be carried. Insurable value appraisals are generally used for the following purposes:
- Proper Placement - Determine the proper amount of insurance to be carried to assist in recovery in the
event of loss, without paying premiums for excessive coverage that can never be collected.
- Proof of Loss - Establish a reasonable basis for preparing the required proof of loss in the
event of a catastrophe.
- Updating - To provide the client with a report which facilitates its revision on an annual
basis in order that the property record and insurable values may be kept current.
Replacement Cost New (RCN)
For insurance purposes, it is necessary to establish the "replacement cost new" for the existing
property assets that are the subject of the valuation. In determining this value, an estimate of the
replacement cost of the assets is determined by utilizing an appraisal technique referred to as the cost approach. In using the cost approach, the valuing of an
asset is determined by the current expense of constructing a similar asset of like utility.
Determination of replacement cost new is the accepted valuation methodology for real and personal property
(contents) as part of an insurable value appraisal. If adequate accounting and/or fixed asset inventory records are
available, inflation factors will be applied to original purchase costs to adjust for
the differing dates when the assets were obtained. Equipment-specific indices are obtained
from recognized manuals and the appropriate factors are applied to each category.
In the case of real property valuations (buildings), once the overall replacement cost for
the asset is established, a reduction should generally be made to account for items that
are excluded from coverage under the insurance policy. Examples of items typically excluded include the building foundation,
underground piping and wiring.
The final value is then reported to the client and/or their insurance carrier for
establishing the appropriate amount of coverage for the real property.
If you would like additional assistance or would like to discuss a potential insurable value appraisal, please contact Cambridge
Partners & Associates for an initial evaluation consultation.
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