Protecting schools with appropriate property insurance is non-negotiable. However, a common challenge many schools face is the risk of being underinsured, especially in a dynamic economic environment. My aim here is to explain why regular property valuation is essential and how it impacts your school’s ability to rebuild and recover after a loss.
The Changing Value of Your School Buildings
In recent years, the cost of rebuilding and repairing property has increased significantly due to material prices, labor costs, supply chain issues, and updated building codes. When your school’s insured value does not reflect the current cost to rebuild, you are underinsured. The consequences of this can be severe: insufficient payouts to rebuild, co-insurance penalties (if the insurance is far enough under the replacement value, the insurance company can reduce the amount it pays on a claim), and operational delays.
Given these risks, how can a school avoid being underinsured? The key is consistent and accurate property valuation.
For insurance purposes, the most relevant valuation is “replacement cost.” This is the cost to rebuild your school with materials and workmanship of like kind and quality at current prices, without deduction for depreciation. This is distinct from “market value” (what the property would sell for, including land) or “assessed value” (used for property taxes).
Secondly, conduct periodic assessments, including an annual review. Your broker should also have access to reliable replacement cost estimators. These tools use current construction data, local labor rates, building characteristics (square footage, construction type, features like specialized labs or gymnasiums), and historical records to provide an accurate estimate of what it would cost to rebuild.
Any additions, major renovations, or changes to building materials (e.g., upgrading from a shingle roof to a metal roof) should trigger an immediate re-evaluation of your property’s insured value. These changes can dramatically alter the cost to rebuild.
In today’s environment, managing your school’s property valuation is a necessity. By ensuring your insured values accurately reflect current rebuilding costs, your school can be ready to recover fully from an unexpected event, keeping its focus on its core mission.
Learn more about the causes and consequences of underinsurance here, or watch a video on the topic with Kyle Butler.
Further Reading
9 Strategies to Reduce Property Insurance Costs
There are many ways to reduce property insurance costs without taking unnecessary risks. Let’s talk about some of these strategies.
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