We are frequently asked: “Why do we need an appraisal?”
There are several reasons why a strata corporation needs a proper reconstruction appraisal each and every year:
1.The primary reason is in the requirements of the Strata Property Act, which states in Part 9 – Insurance, section 149 (4) (a), that “the property insurance must be on the basis of full replacement value.”
: In our opinion, the only way to determine the full replacement value is through a professional appraisal. Real estate market values and tax assessments are not based on the reconstruction value and as an insurance broker, we are in no position to advise anyone on the value of their property, the very best that we can provide is an estimate or generalization of the value.
2. When a strata is new and the insurance is being placed for the first time, the amount of property coverage is usually based on the original “wholesale” cost of construction, which is NOT THE SAME as the reconstruction value for insurance purposes.
:We have seen numerous instances where stratas are unknowingly exposing themselves to having inadequate insurance in the case of a claim, be it a small or large loss, because they have been significantly under insured, in some cases by millions of dollars. If your strata was built more recently and it has never been appraised, we recommend that you obtain an appraisal as soon as possible.
3. Maintaining a current appraisal also improves the protection provided by your HUB StrataSURE policy.
A current appraisal of less than fifteen (15) months old at the time of loss allows us to automatically include our Guaranteed Replacement Cost protection. Without an appraisal, the property coverage will be based on a Stated Amount Co-lnsurance basis rather than 90% Co-Insurance.
4. We believe this coverage is very important because it provides your strata with the peace of mind knowing that you are adequately insured.
Appraisals are not only essential but it is our understanding that they are relatively inexpensive. For example, a fifty (50) unit complex can get a three-year appraisal program that usually costs less than $5.00 per year for each owner.
A word of caution for when you are shopping around for an appraisal – ensure the appraiser specializes in strata appraisals. Over the years, we have seen too many appraisals that do not include everything that must be insured. If you are seeking quotations for an appraisal, we would be pleased to provide you with the names of several local appraisal firms that do specialize in strata appraisals.
We hope that you have found this information to be helpful. If you have any questions on this subject, or any other insurance matter, please don’t hesitate to contact us.