Clients engage Cambridge Partners in order to determine the insurable replacement value of their real and personal property assets. Our valuations help establish an independent value for our clients' buildings and contents. The results of our valuations are generally used by our clients and their insurance carriers (brokers) in order to determine the proper amount of insurance to be carried. Insurable value appraisals are generally used for the following purposes:

1. Proper Placement - Determine the proper amount of insurance to be carried to assist in recovery in the event of loss, without paying premiums for excessive coverage that can never be collected.
2. Proof of Loss - Establish a reasonable basis for preparing the required proof of loss in the event of a catastrophe.
3. Updating - To provide the client with a report which facilitates its revision on an annual basis in order that the property record and insurable values may be kept current.

Replacement Cost New (RCN)

For insurance purposes, it is necessary to establish the "replacement cost new" for the existing property assets that are the subject of the valuation. In determining this value, an estimate of the replacement cost of the assets is determined by utilizing an appraisal technique referred to as the cost approach. In using the cost approach, the value of an asset is determined by the current expense of constructing a similar asset of like utility.

Determination of replacement cost new is the accepted valuation methodology for real and personal property (contents) as part of an insurable value appraisal. If adequate accounting and/or fixed asset inventory records are available, inflation factors will be applied to original purchase costs to adjust for the differing dates when the assets were obtained. Equipment-specific indices are obtained from recognized manuals and the appropriate factors are applied to each category.

In the case of real property valuations (buildings), once the overall replacement cost for the asset is established, a reduction should generally be made to account for items that are excluded from coverage under the insurance policy. Examples of items typically excluded include the building foundation, underground piping and wiring.

The final value is then reported to the client and/or their insurance carrier for establishing the appropriate amount of coverage for the real property.