A Statement of Values is usually required by an insurer, as it allows the insurer to assess the risk in insuring a property, and therefore the premiums to charge.
What is a Statement of Values, and why should you prepare one?
When purchasing insurance, a common document that is sometimes overlooked is the Statement of Values. A Statement of Values is submitted to the insurer and lists all the assets you need to have insured. The Statement of Values will include the value and location of any property you want to have insured.
A Statement of Values is usually required by an insurer, as it allows the insurer to assess the risk in insuring a property, and therefore the premiums to charge. The Statement of Values can list the values in many different ways: how much it would cost to replace (replacement value), the actual cash value of the property, or an agreed value. When assessing the value of property, "property" can include buildings, stock, equipment, improvements a tenant made to the property, mobile equipment, and tools. However, it can also include costs associated with replacing these items, like debris removal, bylaw changes or upgrades, or business interruption insurance.
Making sure that you and your broker properly prepare a Statement of Values is essential to properly insuring your business or property. The process ensures you have a detailed understanding of your assets, as well as your potential risks. It lets you know what is covered, what is at risk, and how to ensure those risks are properly covered are insured. A Statement of Values also provides you with assurance that your policy limits are enough to cover you in case of serious loss. A detailed Statement of Values lets an insured make an informed decision, reduce uncertainty, and makes the claims process less stressful, should a claim need to be made.
Completing an accurate Statement of Values has a host of other benefits, as well. If you have improperly valued your business or property, you risk facing a penalty if you have a co-insurer. You also risk having items not covered by insurance if they are not properly valued – if you have a $200,000 piece of equipment but estimated its value at $50,000, you will not be able to recoup that cost.
It is also important to keep your Statement of Values up to date. Keeping the statement up to date each year also helps manage inflation and changes in the market. If your equipment or property's value has decreased – for example, if development costs decrease – then you may be able to adjust your policy and pay less for the same practical coverage. Similarly, if you have purchased business interruption insurance, but your profits have increased since you purchased it, you may be paid less than you are entitled to, if you had provided an updated statement.
A Statement of Values can take some time to prepare. However, scheduling the time with your broker to evaluate your business needs – including operations and repairs – can reveal gaps you would not have noticed otherwise. It is a useful way to make sure your insurance actually covers you when the time to make a claim comes.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
