The Ordre des évaluateurs agréés du Québec defines the insurable value as the value of a property in relation to its insurable loss.
This value is often based on the reproduction or replacement cost of the insured property, as defined in the organization or the individual’s fire insurance policy. Therefore, to have the right coverage, it is important that the appraiser takes the insurance policy into account and that he makes the distinction between the reproduction cost and the replacement cost.
The replacement cost is the necessary cost to substitute, at today’s prices, a building serving the same utility as the one appraised, by using equivalent and modern materials and following current development standards, concepts and procedures.
The reproduction cost is the replacement cost of something by an exact duplicate. It includes the costs incurred to build a new property which is the exact replica of the other, based on current prices and using the same or closely resembling materials.
Throughout the years, we often noticed that the coverage or insured amounts were insufficient in some cases, and well beyond their actual costs in other cases. In the event of a disaster, underinsured owners may face substantial losses and, by contrast, overinsured owners are unhappy to pay a premium surcharge. It is imperative to be covered with the right and sufficient amount according to what is stipulated in the co-insurance clause of the insurance protection policy.
The replacement or reproduction costs we establish are based on cost directories recognized by insurers. We also stand apart in the industry because we always confirm these costs through surveys conducted directly on building contractors in the Montreal market.
The fees for an appraisal represent a small investment compared to the consequences of poor coverage.
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