Better late than never!
An eye-opening Incident to understand the Importance of Reinstatement valuation
Case study of an Automobile Showroom
An owner having a large showroom of a reputed automobile company has been insuring the showroom’s assets on a lump sum basis based on:
- Internal general assessment
- & paying the yearly premium
But a recent incident changed his entire mindset as one of his friends suffered a loss due to a fire in his showroom cum workshop.
The friend had been insuring his assets based on his own assessment. Due to his failure to update his insurance policy based on a proper reinstatement valuation, his assets were underinsured & at the time of claim payout, he suffered a huge loss.
As a result of this eye-opening incident, the owner of the automobile showroom realized he may have also made the same mistake.
The Burning Problem
The owner of the automobile showroom was not fully aware of the importance of reinstatement valuation, which refers to the cost of rebuilding the insured property/building after a major event, such as a fire.
The cost valuation includes the cost of demolition, site clearance, professional fees, and rebuilding of the property to the same type & standard as before.
The reinstatement value should always be determined by the current costs of various assets.
His Approach/How did he tackle this situation
The owner immediately approached several valuers to carry out the reinstatement valuation ASAP.
After meticulous research, he appointed a qualified valuer with the right expertise to complete the task.
After the selected valuer carried out the valuation exercise effectively, it was found that the sum insured for all showroom assets was considerably lower than the actual amount.
The owner renewed the insurance policy based on the valuation received.