Book Synopsis
The aim of this Endeavor is to enhance the readiness of property owners in case of a disaster, given that individuals seldom comprehend the complexities of insurance Replacement Value and the corresponding amount of compensation involved.
Attainment of sufficient funds can be accomplished by selecting the Building Sum Insured Value (BSI Value) that encompasses the entire estimated catastrophe costs.
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Prevailing legislation is characterized by a significant disparity due to the absence of linkage or harmonization in the formulation requirements of Replacement Value with both strata and general home building insurance, which in all cases results in underinsurance.
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Opting for the Minimum Replacement Value insurance coverage can result in inadequate or non-existent cover for Architect Fees and Charges and Debris Removal costs due to the potential exhaustion or underfunding of the BSI Value and will not provide for any escalation in building costs and very limited or zero accommodation expenses necessary after an Event.
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Should a “total loss” be declared, no additional benefits besides the Building Sum Insured Value are paid.
Insurance providers limit their liability to incurred costs, as allowed by laws.
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There is a variation among policies concerning the provision and execution of additional benefits in strata insurance policies and a safeguard system with home insurance policies.
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Chapter 2 delineates the consequences of underinsurance and presents and compares the additional benefits.
Chapter 3, Figure 3.2, illustrates the presentation and comparison of additional benefits compensation provided by significant strata residential insurance entities, showing that their reliability is questionable because of restrictions and limitations in place.
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In Chapter 4, advanced calculation techniques are outlined in the Building Insurance Valuation Table illustrations.
For low-rise buildings, I present an appropriate method for determining the BSI Value in the event of destruction, catastrophe, total loss, or constructive total loss which incorporates an escalation factor for building costs and an escalation period of 104 weeks for accommodation expenses.
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The method adopted highlights the disparities in the computation of Architect Fees and Charges, resulting in higher values that are based on complete expenses to diminish gap costs. The formulation considers values for catastrophe and temporary accommodation expenses, both set at 15% of the BSI value.
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I present a unique BSI Value formulation for high-rise buildings that incorporates rental values and extends the escalation period to at least 208 weeks for accommodation expenses. It addresses local council planning requirements for compliance with contemporary building codes, leading to an elevated BSI Value.
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This method facilitates a fair and more precise evaluation of proportional disbursement for repair and maintenance expenses among the diverse space components of the building.
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The combination of dissimilar lot entitlements or the utilization of habitable areas for this purpose is neither efficient, precise, nor fair. These systems are deemed unsuitable but may continue to be operational in Australia and British Columbia, Canada.
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The governance of Common Interest Communities in the US is determined by their development codes, such as the Colorado Common Interest Ownership Act (CCIOA).
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Legislative incorporation of the Replacement Value formulation method is not a common practice. In the UK, calculators are commonly used to assess replacement value, but they often overlook catastrophe values and comprehensive insurance, apart from fire coverage.
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It is important to note that the Policy Wording/Product Disclosure Statement always supersedes the Schedule Values. To reduce such inconveniences, it would be beneficial to implement a legally established and structured insurance agreement, backed by the comprehensiveness of the Building Insurance Valuation Report, for both strata and non-strata.
This would enable differentiation between BSI Values for minimum and full expenses. If the estimated full expenses valuation is selected, additional costs value should be separable, when needed, from the insured value of the BSI Value, provided that legislative amendments are made to allow this to happen.
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To avoid confusion with complex provisions, I propose a solution that clarifies these points in the strata or community common interest typology or the general home building insurance contract. The suggested method includes increasing the base property minimum replacement value by a fixed 15%. In case of rent loss, this change can help cover expenses or provide temporary accommodation for 104 weeks after the Event. If you prefer, it is highly recommended to increase the minimum replacement value by an extra 15% to account for higher building costs after an Event, as they may be affected by socio-economic conditions following an Event.
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This theory is advanced in Molly’s loss story, presented in Chapter 2. By increasing the minimum replacement value by 30%, you, as the policyholder, can achieve greater autonomy over your future and eliminate reliance on the discriminatory language and volatile conditional insurance policy terms for covering replacement and additional expenses for the period deemed appropriate.
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Governments cannot reasonably propose that individuals insure for Full Costs when the excess or residue value cannot be distinguished and paid out as full insured value when immediately necessary. Legislative verbiage, regardless of jurisdiction, renders this occurrence impossible, and such a practice is neither fair, effective, nor workable. This makes insurance policies of whatever persuasion grossly unfair. The purpose of legislation is to ensure the protection of the consumer/insured. Unless the proposed legislative modifications are implemented, the consumer/insured will not achieve justice. This publication contributes to the progression of this matter.