When it comes to your business property, you want to be able to protect it at all costs. The insurance policy you’ve purchased is meant to do just that, but what happens if your policy doesn’t fully cover the cost to replace or repair your assets? This is why it’s important to understand the concept of insurance to value, and what steps you can take to increase your insurance coverage if you need to.

What is insurance to value?

Insurance to value is the amount of insurance you need to hold in order to replace or repair your business assets, and it’s based on their current value. However, certain situations have caused many businesses to find themselves with inadequate insurance coverage. Property value has been increasing due to competitive bidding, and the cost to replace or repair property has also been increasing. The pandemic, natural disasters and labor shortages have created supply chain issues with building materials and availability of skilled labor—driving up the cost of both. As a result, the cost to repair damage or fully replace assets has gone up, and requires adequate policy limits for coverage.

What can happen if you’re underinsured

Let’s say a tornado causes catastrophic damage to your business. You will need to rebuild, and you’re glad you have property insurance. However, the coverage you purchased wasn’t based on the current value of your business assets, and you haven’t had a recent appraisal. As a result, when you submit a claim, your coverage is much less than you expected and you’re responsible for the deductible plus a coinsurance payment. This ends up being much more than it would have been, had you increased your insurance coverage based on the increased value of your assets.

How to determine accurate property value

Of course, you’ll want to take steps to be sure your insurance policy covers the value to replace or repair your business if it sustains damage. And to do that, you’ll first need to accurately assess the value of your property. By requesting an assessment, you can get a better idea of the policy limits you’ll need to carry so you’re fully covered.

To do this, you can:

  • Use building valuation software. This is a program that will walk you through various details about your property to help you assess the value to replace it. You can purchase this software through various third-party vendors.
  • Work with a vendor. If you don’t feel comfortable assessing property value on your own, or you want to ensure a more accurate assessment, you can always work with a vendor that offers property value assessment. Leave this responsibility in the hands of the experts!

Beware of common valuation errors

Certain factors can affect the value of your property but are commonly overlooked. These include:

  • Location—if you’re in an area with a high cost of living, where labor costs for repairs might e expensive.
  • Quality of repairs—the cost depends if you’re looking to do basic versus luxury remodeling, or restoring/replacing historic features.
  • Square footage—if your square footage includes rentable space, it might not count into your total square footage.
  • Sprinkler systems—to repair these can include local code requirements to ensure you remain in compliance.
  • Architecture—if your property features a unique design, it can be more complex (and therefore costly) to rebuild.


Contact Odell Studner

If you’re in need of an assessment and not sure where to get started, don’t worry—Odell Studner can help! We specialize in risk management to help businesses identify and mitigate risk. To learn more, contact us today!