Establishing your commercial property’s value for insurance purposes can be difficult, especially when it may be more valuable to you, as a business owner, than it is to the insurance company.

If your property is essential to the success of your business, you may see it as priceless, if it is expensive to maintain, you may assume the value will be higher, and if it is older, you may believe it is inexpensive to replace.

However, the way you look at it, or assume it will be valued at will not be how your property’s value will be assessed.  When insuring your business property, it’s important to understand what the property is truly worth, and how this value is determined.

By understanding the following terms may help you to better understand how your commercial property’s value will be established, identifying the insurance coverage that is right for you.

  • Market value- This is the estimated dollar amount your property and it’s land would sell for today. The market value is affected by things such as location, condition, and the commercial real estate market, and is the value used when selling your property.
  • Replacement cost- This is the dollar amount it would take to replace or repair your building with the same materials. This cost includes the cost of hiring contractors, but not the value of the land. Typically, the replacement cost is lower than the market value.
  • Actual cash value- This is the cost to replace or repair your property, less depreciation. Actual cash value will likely be the lowest value of the three.

Before deciding which policy is best for your commercial property, it is best to consult with your insurance agent. Contact Brazelton Insurance Group for more information today!