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Written by Administrator
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Saturday, 20 June 2009 07:32 |
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Page 18 of 18 Insurance Replacement Cost Property replacement cost insurance promises to replace old with new. Generally, replacement of a building must be done on the same premises and used for the same purpose, using materials comparable to the quality of the materials in the damaged or destroyed property. Actual Cash Value (ACV) The ACV is the default valuation clause for commercial property insurance. It is also known as depreciated value, but this is not the same as accounting depreciated value. The actual cash value is determined by first calculating the replacement value of the property. The next step involves estimating the amount to be subtracted, which reflects the building’s age, wear, and tear. This amount deducted from the replacement value is known as depreciation. The amount of depreciation is reduced by inflation (increased cost of replacing the property); regular maintenance; and repair (new roofs, new electrical systems, etc.) because these factors reduce the effective age of the buildings. Functional Replacement Cost This method provides for the replacement of a building with similar property that performs the same function, using less costly material. The endorsement includes coverage for building codes automatically. In the event of a loss, the insurance company pays the smallest of four payment options. - In the event of a total loss, the insurer could pay the limit of insurance on the building or the cost to replace the building on the same (or different) site with a payment that is “functionally equivalent.”
- In the event of a partial loss, the insurance company could pay the cost to repair or replace the damaged portion in the same architectural style with less costly material (if available).
- The insurance company could also pay the amount actually spent to demolish the undamaged portion of the building and clear the site if necessary.
- The fourth payment option is to pay the amount actually spent to repair, or replace the building using less costly materials, if available.
Agreed Value or Agreed Amount Agreed value or agreed amount is not a valuation method. Instead, his term refers to a waiver of the coinsurance clause in the property insurance policy. Availability of this coverage feature varies among insurers but, it is usually available only when the underwriter has proof (an independent appraisal, or compliance with an insurance company valuation model) of the value of your property.
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Last Updated on Friday, 28 August 2009 05:06 |
I need to organize Tender for BCP implementation for my company.
What is neccesary for Tender ?