Be prepared: Have your property appraised before Mother Nature surprises you
Natural disasters and severe weather events pose a significant risk to many Canadians. In recent years, flooding, ice storms and forest fires have caused substantial damage to major urban and rural areas, disrupting families, communities and economies.
Canada experiences insured losses of about $1 billion a year from catastrophic events, according to the Insurance Bureau of Canada (IBC). For example, the 2016 wildfire in northern Alberta was by far the costliest insured natural disaster in Canadian history, with estimates of the insured property damages totaling $3.58 billion, IBC said in its July 2016 report. This is more than twice the amount of the previous record breaker for catastrophe losses – the 2013 flood in southern Alberta, which cost $1.7 billion in insurance claims, IBC said in the Facts of the Property and Casualty Insurance Industry in Canada 2016.
The number and cost of catastrophic losses in Canada has been on the rise in recent decades. This is not a Canada-only phenomenon but a part of a worldwide trend.
Needless to say, the potential for a severe weather effect threatens all Canadians and property owners need to be prepared. It is traumatic enough to have your home destroyed and your family distraught, let alone deal with difficulties recouping your losses after the disaster.
Often, homeowners hear about the steps they need to take after a disaster occurs in order to recover from their traumatic loss. But are there things they can do before the loss occurs that will help expedite the insurance-claim process, and get their family back on track? Luckily, the answer is yes.
Property appraisals can help to determine replacement value
Having an updated appraisal of your property prior to a natural disaster will give homeowners a much-needed peace of mind. Their appraiser will give them the information an insurance company needs to determine the true replacement value of their property.
What homeowners need to do is hire an appraiser with the intention of using the appraisal report for insurance purposes. This will help the insurance company determine the cost of replacing your property as “new.”
When completing the replacement cost coverage, the appraiser will gather a detailed account of the property’s characteristics. These will include the following:
- Dwelling type
- Size of the dwelling
- Interior and exterior finishes
- Heating and cooling systems
- Unique features such as fireplaces, custom built appliances or security measures
- Site improvements such as the garage, deck, swimming pool and any outbuildings, etc.
These items are required to calculate the cost of rebuilding your home and its improvements. Lender information, property tax information, building and renovation permits, multiple-listing information, public and private data, assessment information and any other reliable third-party information may be researched to obtain as much information on the property.
Important to find a professional, qualified appraiser
All appraisals completed by designated appraisers are required to comply with the professional standards. For example, appraisers designated by the Appraisal Institute of Canada must meet the Canadian Uniform Standards of Professional Appraisal Practice (CUSPAP). Getting a designated appraiser will relieve the stress that you and your family may undergo at a time that can be emotional and tumultuous.
Typically, the insurance company would request an appraisal on the cost of replacing the property using the same material. The replacement is expected to return the property to its previous design and finishes, as of a certain effective date. Keep in mind that this is a replacement value, not market value.
The insurance company may also request that the appraiser provide a fair market value of the property as of a certain effective date. The market value is based on market evidence of similar properties that have been sold in the recent past.
The effective date can be the date of the incident, a date prior to or after the incident.
Follow this to-do checklist and protect the value of your property in case of a natural disaster:
- Take interior and exterior photos of your property and its contents.
- Keep receipts and invoices of improvements and renovations in a fire-resistant box or safety deposit box
- Hire an appraiser to provide an independent and unbiased estimate of your property’s replacement or market value. The estimate should include the value calculated by the Cost Approach Method. You don’t need to do this annually, but perhaps every five years, or after you’ve made significant improvements to your home since your policy renewal.
- Have your insurer annually update the replacement cost new of the dwelling and all site improvements (garage, deck, outbuilding, etc.). This will ensure that the replacement cost on your policy is reflective of the current construction rates and costs.
- Get real property and personal property insurance.
- Keep an inventory list of items owned and features of your home.
- Become familiar with the disaster relief fund and the process of contacting your local authority.
- Review information on emergency preparedness by visiting the following provincial agencies:
Manitoba: Manitoba Emergency Measures Organization
New Brunswick: New Brunswick Emergency Measures Organization
Newfoundland and Labrador: Newfoundland and Labrador Fire and Emergency Services
Northwest Territories: Northwest Territories Emergency Management Organization
Nova Scotia: Nova Scotia Emergency Management Office
Nunavut: Nunavut Emergency Management
Prince Edward Island: Prince Edward Island Emergency Measures Organization
Quebec: Quebec – Ministère de la sécurité publique
Saskatchewan: Saskatchewan Emergency Management Organization