What is an insurance valuation?
Written by Jessica Tait
Updated at January 18th, 2021
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Import
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A building insurance valuation is undertaken to assess the estimated cost of reinstatement for a development, taking into consideration factors such as the cost of rebuilding, cost escalation over the lead in and construction period, demolition and removal of debris and professional fees. Another important consideration is whether the development could be reconstructed to the same height, plot ratio or density under the current Town Planning Scheme.
This scenario is most common in areas where zoning densities have changed over the years which can potentially result in a ‘unit shortfall’. Essentially this means the existing development exceeds what would normally be allowed on the parent site with current planning requirements. An example of this may include a development of say 10 single level villas on a site which could only accommodate 7 units, or a 5-storey building which could only be reconstructed to three levels as a result of planning amendments since the time the development was constructed. Another example may be a road reservation impacting the parent site which could potentially limit the effective land area and therefore lot yield.
In the instance of a unit shortfall, it is important to consider what impact this would have on the strata owners if major damage, or a total loss were to occur. In the example of the single level villas above, there would potentially be 3-unit owners that could not have their property rebuilt which is why it is important to ensure your sum insured provides adequate cover to put you in as close to the same position as possible.
Answers provided by Hemsley Paterson Valuers, a preferred supplier to Abode Strata
See link below in the event of a unit shortfall, we can provide advice on the scenarios shown.