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Regular Property Valuations: Helping Businesses Better Manage Risks - Helmsman

Regular Property Valuations:

Helping Businesses Better Manage Risks

Maintaining an accurate valuation of your business’ property can help you avoid financial hardships in a claim situation. In this article, we’ll explore the reasons for shifting property valuations, along with the benefits of regular, accurate property valuations.

Construction woes impact property valuation

Building materials and labor costs tend to rise slowly over time, which plays a role in property valuation. And while construction costs increased an average of 3% per year over the last decade, the turbulent events of 2020 and 2021 — including COVID-19, inflation, supply chain issues, and labor shortages — have led to rapid increases in costs. As a result, a building valued at $1 million five years ago could easily cost 20% more to replace today. For example, from December 2020 to December 2021, the cost of the following products skyrocketed:

  • Steel mill products: +120.9%
  • Fabricated structural metal products: +43.8%
  • Concrete products: +8.4%
  • Precast concrete: +11.6%
  • Plastic pipes: +57.3%
  • Roofing materials: +9.8%
  • Glass: +9.0%

 

In addition to the increase in building costs, contractors are struggling to find skilled workers. According to the U.S. Chamber of Commerce, 92% of contractors report moderate to high levels of difficulty finding qualified workers, and 42% of contractors who cannot find workers have turned down work due to skilled labor shortages. The scarcity of workers and lack of available contractors for projects have driven up construction prices, making it more expensive to rebuild a property that has been damaged.

Supply chain issues that have caused inventory problems and delays for equipment purchases and repairs, are also contributing factors in higher construction costs. Items shipped from overseas are often delayed, and the cost of repairing or replacing items with new materials of a similar kind and at replacement cost value, have been key drivers of higher costs.

Other factors that can influence a business’ property valuation

Beyond construction costs, there are other factors that can influence the valuation of your business property. For instance, the increased frequency and severity of weather activity can magnify the risk of loss.

For example, over the last several years, hurricanes have retained higher wind speeds further inland, and severe storms such as tornadoes are occurring more frequently in areas where they have not historically been as common. After such events, obtaining the right supplies for rebuilding can be a challenge.  Business interruption — due to severe weather, pandemics, or other disruptions — must also be factored in.

Understanding replacement cost valuation

If a claim occurs and your current property value, which includes all the factors mentioned above, isn’t accurately stated in your policy, your business could struggle to quickly recover and resume operations. Using “replacement cost” valuation is a crucial way to keep your property from being underinsured. Unfortunately, many property owners simply don’t understand what a replacement cost valuation entails.

A replacement cost valuation differs from acquisition value or market value, which is the amount a buyer would pay to purchase a given property. It also differs from actual cash value, which is the depreciated value of the property. Simply put, replacement cost is the real-time expense to repair or replace a building with new materials of like kind and quality – without any deduction for depreciation. Replacement cost valuation results in the most accurate determination with the least amount of risk.

Regular property valuations help mitigate risks

The longer the time between valuation adjustments, the greater the difference between the replacement cost of your property and its current valuation. And while it’s always been important to check property values for accuracy, the recent market turbulence and shift in costs stresses the need for even more frequent reviews.

Conclusion

The best way for you to ensure that your business property has the coverage it needs to recover from a loss is to schedule an annual property valuation with your insurance company. With the most accurate information readily available, you can better substantiate your claim and quickly get back to business as usual.

At Helmsman, we keep your business moving –
even in the event of a loss

As a partner third-party administrator (TPA), our control and property engineering consultants are industry specialists with degrees and designations in engineering, safety, or risk control, as well as active players on various national safety committees. We understand the nuances of your business and can help you build a strong, more robust risk management program that includes regular property valuations. 

Callouts:

– A building valued at $1 million five years ago could easily cost 20% more to replace today.

– The longer the time between valuation adjustments, the greater the difference between the replacement cost of your property and the existing valuation.

This website is general in nature, and is provided as a courtesy to you. Information is accurate to the best of Helmsman’s knowledge, but companies and individuals should not rely on it to prevent and mitigate all risks or as an explanation of coverage or benefits under an insurance policy. Consult your professional adviser regarding your particular facts and circumstance. By citing external authorities or linking to other websites, Helmsman is not endorsing them.

2022 Workplace Safety Index: the top 10 causes of disabling injuries

Today, the top 10 causes of workplace injuries cost U.S. businesses more than $1 billion a week, with total injuries costing more than $58 billion every year. Yet what makes these statistics even more disheartening is that the risk of many workplace injuries can be reduced.

The Workplace Safety Index (WSI) compiles the top 10 causes of the most serious non-fatal workplace injuries – those that caused employees to miss work for more than five days – ranked by direct cost to employers based on medical and lost-wage expenses.

Back injuries and broken bones can occur on any job, not just high-risk industries such as construction and healthcare. By making business owners aware of common scenarios for serious injuries, we can work together to reduce risk and create a safer workplace for tomorrow.
Download PDF
1. Overexertion involving
outside sources (handling
objects)
Cost per year: $12.63B
1. Overexertion involving outside sources - handling objects
2. Watch for wet floors
2. Falls on the same level
Cost per year: $10.26B
3. Struck by object or
equipment (being hit by
objects)
Cost per year: $5.66B
Watch for unsecured tools, racks, and product
4. Falls to a lower level
4. Falls to a lower level
Cost per year: $5.07B
5. Other exertions and
bodily reactions (awkward
postures)
Cost per year: $4.01B
Watch for stepping down from a vehicle
Watch for distracted drivers
6. Roadway incidents involving motorized land vehicle (motor vehicle crashes)
Cost per year: $3.59B
7. Slip or trip without a fall
Cost per year: $2.526B
Watch for slippery or uneven walkways
Watch for moving or rotating machinery
8. Caught in or compressed by equipment or objects
Cost per year: $2.19B
9. Struck against object or equipment (person colliding with objects or equipment)
Cost per year: $1.87B
Watch for fixed objects in the workspace
Watch for speed, terrain, and visibility
10. Nonroadway incidents involving motorized land vehicles (off-road vehicle incidents)
Cost per year: $1.39B

A safer workplace helps protect your employees — and your bottom line. Partner with Helmsman Management Services to learn how to identify and control for potential workplace injuries. Every preventive step helps you better mitigate your exposure to risks.

Study Methodology: the annual Workplace Safety Index is based on information from Liberty Mutual Insurance, the U.S. Bureau of Labor Statistics (BLS), and the National Academy of Social Insurance (NASI).¹ BLS nonfatal injury data are analyzed with the Liberty Mutual data to determine which events caused employees to miss more than five days of work, and then to rank those events by workers compensation costs, which are then scaled to the NASI total cost. To capture accurate injury cost data, each index is based on data three years prior. Accordingly, the 2022 index reflects 2019 data. To capture accurate injury cost data, each index is based on data three years prior. Accordingly, the 2022 index reflects 2019 data.

1. Liberty Mutual is grateful for the data collection accomplished by the National Academy of Social Insurance ( https://www.nasi.org/wp-content/uploads/2021/10/2021-Workers-Compensation-Report-2019-Data.pdf), and the customized data provided by the U.S. Bureau of Labor Statistics, Office of Safety, Health, and Working Conditions.

Claims case handling for when disaster strikes

Business doesn’t stop moving even when a disaster occurs. Whether your business is impacted by a devastating fire, a catastrophic injury, or a brand bashing claim, we are here to help keep your business intact and set things right.

 

Workers compensation claims

Walk through a claims case study to see how we helped a worker with a severely injured hand from a machinery accident recover and return to work. 

 

Liability claims

Watch the claims case study to see how our expert claims team was able to quickly avert a faulty, brand tarnishing claim. 

Property claims

Learn from this claims case study how our property claims team helped a business get back to running quickly after a catastrophic fire. 

This website is general in nature, and is provided as a courtesy to you. Information is accurate to the best of Helmsman’s knowledge, but companies and individuals should not rely on it to prevent and mitigate all risks or as an explanation of coverage or benefits under an insurance policy. Consult your professional adviser regarding your particular facts and circumstance. By citing external authorities or linking to other websites, Helmsman is not endorsing them.