Your Property Valuation is Likely Outdated
As manufacturers, it is critical to stay ahead of the curve on all of the new and emerging technologies in order to keep your firm competitive. As new machines improve the efficiency and productivity of your workers and your firm, it is important that you are keeping accurate records of the value of all components of your production site. Often, as your firm grows, insurance limits for buildings, machinery and production equipment are more likely to become outdated and inaccurate.
There are many outside factors to consider in determining the estimate of a property’s value. Economic and social trends, governmental controls and regulations, and even environmental conditions all influence the value of a property. Additionally, if the machinery replaces a very manual task that may take a large number of man-hours to complete without the tool, you should also consider the labor costs without the tool in your valuation. Many of the internal and external factors are continually in fluctuation year-to-year, so relying on the values identified the previous year (or worse, when the policy was instituted) could leave your firm severely underinsured.
It is important to differentiate what the limit is being based on. Many limits reflect the accelerated depreciation value from the balance sheet. However, this is inadvertently placing an actual cash value on the production equipment. At a time of loss, an actual cash value would not provide enough coverage. Instead, the limit needs to reflect a replacement cost. Although replacement costs have risen and market values have dropped, experts agree that it is worth the extra money to insure your property based on replacement cost. Using an actual cash value only provides limited savings due to the lower premium, but if you encounter a major loss, the replacement cost value will cover all of the expenses needed to recover from that loss.
You can work with a trusted RCM&D advisor to analyze (and re-analyze) your existing property valuations and limits to identify any areas that may be outdated or inaccurate.