Business Owner's Desk
Plain-language insurance guidance
Practical answer
How much should I insure my property for?
Market value and accounting value may not equal reinstatement cost.
The short answer
Commercial property is commonly insured on a reinstatement or replacement basis. The figure may need to include demolition, debris removal, professional fees, freight, duties, installation, inflation, and the cost of rebuilding to applicable standards.
What to do now
- 01Obtain a professional reinstatement valuation rather than copying the balance sheet.
- 02Separate buildings, machinery, contents, stock, tenants' improvements, and property of others.
- 03Allow for price inflation, imported-equipment lead times, freight, duties, and peak stock.
- 04Confirm whether average applies and how values are tested by item and location.