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What is an insurance replacement valuation?
An Insurance Replacement Valuation is the estimated actual cost required to replace/rebuild the building in accordance with the requirements of each state or territories legislative requirements in the event that the building is destroyed or partly destroyed.
What should an insurance replacement valuation include?
An insurance replacement valuation takes into consideration the following items:
- Replacement cost of the owners corporation buildings & common areas
- Demolition, disposal & storage costs
- Removal of debris
- Professional fees (eg. architects & surveyors)
- Government fees & taxes (eg. contributions or taxes).
Without an allowance for these additional rebuild costs, an Owners Corporation could face serious financial hardship in the event of an insurance claim because the level of cover under the strata insurance policy is not adequate to cover all the costs associated with rebuilding the property so the owners can return to their pre-damage life.
Are insurance replacement valuations compulsory for strata schemes?
While an insurance replacement valuation is always a great idea, it is also compulsory under some state-based strata legislation. You should always check with your strata manager or your state or territory legislation to understand if a valuation is required and how frequently you are required to obtain one.