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Valuation Definitions

When reading the insurance policy, there are many terms about valuation.

Actual Cash Value: the fair or reasonable cash price property would bring in a fair market, allowing for depreciation.

Assessed Value: The valuation placed on property by a public tax assessor for purposes of taxation. The main assessor for B.C. is BC Assessment, a provincial Crown corporation governed by the Assessment Act. Due to the high number of properties it must assess, BC Assessment uses a mass appraisal system, using data from sales, land titles, municipal planning departments and other sources. Only a limited number of properties are actually inspected in any given year, and individual property appraisals are usually not undertaken by BC Assessment unless an assessment is appealed. The mass appraisal approach means that the assessed value may not include some unique components of a dwelling that would contribute to its value. But since taxes must be calculated based upon a specific value, the Assessment Act requires that the assessment notice specify a single value. A certain amount of information about assessed value is in the public domain and is available online at www.bcassessment.ca; click on e-Value BC. BC Assessment determines properties value as of July 1 (the ‘valuation date’) of each year, and sends assessment notices to homeowners the following January. Municipal taxes are assessed on the basis of this assessed value. Property owners can appeal the valuation, or can request that the valuation change to reflect temporary conditions such as major refurbishment.

Appraised Value: An opinion of a property’s fair market value, based on an appraiser’s knowledge, experience and analysis of the property.

Cost Approach: One of the techniques used by appraisers to estimate value, cost approach combines the estimated land value and the depreciated value of the improvements. The underlying presumption is that a person will not pay more for a property than the cost to replace it: that is, the cost of the site plus the value of the improvements. The value of improvements is determined using a manual that is adjusted for local conditions, or from construction costs derived from local contractors. The value is then adjusted to reflect any depreciation to the improvements. This technique is not frequently used for older properties, due to the difficulties in accurately calculating the depreciated value of the improvements.

Fair Market Value: The highest price that a buyer, willing but not compelled to buy, would pay and the lowest a seller, willing but not compelled to sell, would accept. Market value is a product of many factors including location, size, features and current market conditions. To develop market value, an appraiser typically does a full physical inspection of the property followed by a detailed study of all the other factors. This is the most fluid of all the values on a given piece of property as the factors are almost always changing. The only time the factors from the actual cost of construction play into this number is when it is a new construction. The new construction costs are used as a basis to determine the worth of building relative to the anticipated sale price. Obviously the truest indicator of the market value of a piece of property or home is what it actually sells for.

Reconstruction Cost: The cost to rebuild, including soft costs (engineering reports, architectural drawing, municipal permits), removal of debris and reconstruction. Could include the cost of enforced demolition and removal of undamaged portions of the building.

Replacement Value: The cash value or cost to replace a thing. The value placed on a piece of property by an insurance company for the purpose of coverage.

How to read your condo insurance policy

First of all, the building is covered by your Strata insurance policy. So, no need to worry too much about your building, including structure, roof, wall, etc.
But the others are not covered by your strata insurance policy. That is why you need buy your own unit insurance policy, or condo insurance.
There are some key coverage you need to ask your agent or read your policy by yourself.
Dwelling Improvements, Alterations, and Additions
Condominium owners are covered for accidental damage to improvements you make in your unit for which your strata’s policy does not provide coverage, subject to your condo insurance policy limits. For example, you changed your shower in your washroom. It will be covered by your own condo insurance policy.
Loss assessment
Condominium owners will also receive up to $1,500 for assessments arising from covered damage. This can be used to pay for your share of property damage or injury awards for which your strata’s policy does not provide coverage. Typically, up to $50,000 is available, but this may vary depending on your policy.
The limit $1,500 is just an example. I know some policy has high limit, like $15,000 limit.
This one is very important. Say when some thing happen on your strata building, and it is covered by your strata policy, but the limit is not enough or the deductible is so high, your strata can not afford it. Then, after a Special General Meeting, a special loss assessment will be arranged for every unit. As an unit owner, you have to take your own share of it. Because your condo insurance provide this loss assessment coverage, you can survive in this financial situation.

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Earthquake may happen in Vancouver

Last weekend, there were reports on a higher probability of an earthquake in western canada.
CBC news said:

Seismic scientists say there is a greater probability of a major earthquake on B.C.’s South Coast in the next week, following a series of minor quakes that have worked their way up from Washington.
But seismologist Garry Rogers of the Geological Survey of Canada added that despite the increased probability of a big quake, the chances are still very low.

Some people heard the news and go to store to buy lots of water and some homeowner and business man go to buy earthquake coverage for their home or business insurance.
Please be noticed, most of insurance company may accept these mid-term changes, but they will retain the additional premium of addition of earthquake coverage, i.e. no refund if such coverage is to be cancelled later.

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