Insuring to “Value” & Coinsurance Clause

Contributing Author: Mark Rogina, CPCU / Wirtz Insurance Agency, Inc.

You’ve just purchased a new piece of commercial real estate.  When it comes time to insure it, your insurance agent provides you with a commercial insurance quote in which the building replacement value is much higher than you actually paid for it.  Since you invested a lesser amount into it, why would you insure it for more? You only want to be covered for what you actually paid for the piece of property.

Unfortunately, this is a scenario that plays out all too often.  The market value of property ends up being far less than what it actually might cost to rebuild the building from the ground up.  To understand this fully, it is important to define some key terms:

Market Value – the cost to purchase a property

Replacement Cost – the cost to rebuild a property using today’s construction methods and materials Continue reading Insuring to “Value” & Coinsurance Clause

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