Insurance Appraisals

Insurance Appraisals

You Get What You Pay For 

By Gary Maehl, ASA / Published September 2018

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hat is a property insurable value appraisal?

While property insurable value reports are usually referred to as appraisals, they actually represent the estimated current construction cost of an existing building based on the premise that it is built in its entirety as a single project.

     It should be noted here that the Florida Department of Business and Professional Regulation, Real Estate Appraisal Board, does not consider a property insurable value report to be an appraisal of real estate for appraisal licensing purposes; there is no state requirement for age, education, or experience, nor is any license or certification given or needed for this activity. Therefore, consumers should be aware that there are or may be unqualified individuals or companies soliciting for this business. Citizens Insurance accepts reports from individuals deemed by them to have proper and appropriate qualifications.

Does an association need an insurable value appraisal?

     The State of Florida’s Condominium Act (Florida Statutes Chapter 718.111[11]) requires condominium associations to have an independently prepared insurable value appraisal every three years. Even without the legal requirement, it is good business practice to protect the value of the association assets with the proper amount of insurance.

     There is no requirement that an update of a prior appraisal must include a new inspection, and it is common practice for an appraisal to be updated without one. This is not necessarily bad practice as long as the property is inspected every six to ten years to include periodic changes to the property and risk factors.

     While the Condominium Act states that appraisals are required, the Homeowners Association Act (Chapter 720) does not address the topic of insurance in any detail. Thus, insurable value appraisals are usually prepared giving consideration to both the HOA documents and the insurance company underwriting standards.

What are the benefits of an insurable value appraisal?

     For directors and officers of condominiums or homeowner associations, the benefit comes from the knowledge that their fiduciary responsibilities have been met and the individual unit owners are protected from loss of their individual property investment.

     For a unit or property owner, the benefit of an insurable value appraisal is the peace of mind that comes from knowing that the building replacement cost insurance policy is adequate to cover claims in the event of a loss, plus the knowledge that their own property and their investment is properly insured.

What is the insurable value?

     Many insurers will require that a full replacement cost appraisal be submitted along with an application for a new insurance policy.

For standard property casualty insurance policies, this will include the replacement cost new for each building or structure as well as other scheduled site or interior improvements. Florida law allows condominiums to exclude from this value an amount representing the costs of interior decor, fixtures, appliances, and built-ins in the private condominium units, but not for these items if they are located in common areas. HOA units may or may not have these exclusions, with the determination usually made giving consideration to condo law and the HOA documents.

     If the items excluded from coverage in the master association policy are not insured by the individual unit owners with their own condominium insurance policies, they may not be compensable in the event of loss or damage.

     For property flood insurance policies, all appraisals must include the above condo exclusions and also add a value for below ground foundations and improvements.

How are insurable value appraisals prepared?

     There are several methods of developing an insurable value appraisal. These include itemized component values developed from proprietary construction cost data bases, published detail or component cost data sold by recognized authorities for construction cost data, and computer-generated values developed from software by the above publishers or others in the construction data business.

     While it would be unusual for any one building to be valued the same by use of all the methods above, it is believed the insurance industry considers the differences to be relatively minor and will accept valuations of any type if deemed reasonably prepared. Some insurers such as Citizens Insurance in Florida will only accept valuations prepared by computer software approved by them.

     Regardless of the method utilized in the valuation, the property should be inspected by a qualified appraiser or estimator. The building should be measured, and the construction materials, features, and details should be described. A general sketch plan and color photos of the building interior and exterior and other insured improvements should be included in the appraisal. If a computer-generated value is to be reported, a printed copy of the output report should be included in the report submitted to the association.


     As in many other purchase decisions, you generally get what you pay for. Some estimators use prior appraisals by others in lieu of their own inspection so they can quote a lower fee. The lack of state licensing or registration allows some to claim to be qualified to make appraisals when that is not the case. Consumers should not hesitate to ask how long one has been in business, how many appraisals they have made, and if they can provide references.

Gary Maehl, ASA

President, Allied Appraisal Services

Gary Maehl, ASA, is a Florida State-Certified General Real Estate Appraiser and president of Allied Appraisal Services located in Pompano Beach, Florida. For more information on Allied Appraisal Services, visit or call (800) 273-4623.