After a loss, your insurance company needs to determine the value to repair or replace your asset. Many valuation methods exist to estimate the theoretical replacement of the building. As there is no standard method among carriers, this decision is typically made in consultation with a qualified cost consultant. The primary methods of establishing value are replacement costs, replacement or reconstruction costs and market value.
· Replacement Cost- Cost to replace the building according to a ‘black book’ value, typically the Marshall & Swift Method; this uses an estimated value of labour, material, fees etc. incurred before the date of loss as well as architectural and engineering costs.
· Reinstatement or Reconstruction Cost – The cost to knock what’s left down, clear the site and build it again to the current code, a much more detailed scope, should be completed by a quantity surveyor. This method considers labour, material, fees, design costs, restoration of historical elements, architectural fees, demolition, permits, or premiums associated with the accessibility of the site location.
· Real Estate Appraisal or Market Value – Also known as Fair Market Price for Building and Land- does not consider labour, material, fees, design costs, restoration of historical elements, architectural fees, demolition, permits or premiums associated with the accessibility of the site location.
Any time construction scope and costs are reviewed, building code standards are done so as well. Unaltered structures are typically grandfathered into regulations of the code at the time of initial build, however, when it becomes necessary to renovate and reconstruct, all areas affected may need to be compliant with the most recent code requirements depending on a host of surrounding factors. A qualified consultant is well-versed in these changes and can ensure that your rebuild meets or exceeds current building code standards
Regardless of how the value is determined, in-depth construction knowledge is critical. Everything from airports to zoos have their own codes, rules, and regulations to follow, yet they all must consider the scope of work required, current building codes and cost management.