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Why Is Valuation Important?

Why Is Valuation Important?   

Several members have experienced total losses that exceeded their insured values - claim settlements were limited and did not fully cover reconstruction costs.  The amount of your Property coverage is limited to the "stated value" of each individual building insured. Valuation is based on this formula: 

Square Footage (SF)  x  Replacement Cost (RC)/(SF) = Insured Value (IV)

                SF x RC/SF = IV  

SF:  Exterior Dimension of Structure (not overhang)



1200 (SF) X $100 (RC/SF) = $120,000 (IV)


1000 (SF) x $1200 (RC/SF) - $120,000 (IV)


If this building were to be deemed a 'total loss', the maximum* we would pay is $120,000.  If either SF or RC factors are understated, your asset could be under-insured

Some members experienced total losses, usually a fire, where the IV plus all additional coverage monies did not cover the cost to replace the structure.  We have found that in some instances, the SF has been understated, such as second floors not included in the measurements, which drastically understates the true replacement cost.   

HUD guidance requires Authorities to insure to full replacement cost.  The Appraisal Study Phase I result provides you with initial data and observations to help us ensure you are properly covered. 

*Other ancillary coverages may increase overall recovery