Real Estate Journal — Financial Digest — January 12 - 25, 2018 — 5A
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F inancial D igest By Ronald Diskin, Ronald Diskin Associates Corp. Mortgage Value vs. Insurance Replacement Cost
O ne of the biggest ques- tions insureds have regarding Property
For insurance purposes, you should insure your property to 100% of its replacement cost. This will ensure the ability to rebuild the entire building (of like kind and quality not including code changes which can be insured with Building Ordinance coverage), the way it is now, in the event of a total loss. One thing to remember, you're not insuring the land so leave this out of the replace- ment cost valuation of the property. Ronald Diskin is presi- dent & CEO of Ronald Dis- kin Associates Corp. n
building. Market value is the price paid for your building. Replacement cost is the price or cost it will take to rebuild your building in the same spot, same size and same quality of construction, at today's costs. Insurance companies use the replacement cost valuation. These can be two completely different numbers. For example, a building purchased in a depressed city neighborhood, may have a market value of $1.2 million. The exact building, located in a nice suburb, may have a market price of $1.6 million;
however, the cost to rebuild the property after a loss would be the same in either location. The insurance company is looking to insure the building for the full replacement value, not the current market value. Here is another different ex- ample. If an 18 unit I 2 story I brick building I 12,000 s/f had a replacement cost of $1.5 mil- lion and you had a mortgage of $1 million and used the mort- gage value I market value as a basis for building insurance, the following would happen: • If there was a total claim and the insured went to re-
build, they would have an out of pocket expense of $500,000 as they policy would pay only $1 million. • If there was a partial claim, $100,000, the insurance carrier could pay based on a co- insurance penalty, $66,000, as the building was not insured to the correct replacement cost value. ($1 million mortgage vs. $1.5 million Replacement Cost = 66% of replacement cost value) As you can see the property owner did not insure the build- ing correctly and could suffer a major financial loss.
insurance re- volves around the amount of insurance to place on their prop- erty. When purchas ing a building, the mortgage
Ronald Diskin
company requires the prop- erty owner to obtain insurance prior to closing. Most building owners as- sume the amount of building coverage will be equal to the amount they paid for their property. This is incorrect in some cases. There are different methods to determine the value of a Amtrust Title adds senior underwriter Samuel Shiel Esq. NEW YORK, NY — Am- Trust Title Insurance Company (AmTrust Ti- tle) announced that Samuel Shiel, Esq. , a seasoned attor- ney with more than 25 years in title insurance, real estate and the regulation of finan- cial institutions, has joined AmTrust Title as midwest underwriting counsel. Based in Chicago, Shiel is working closely with James Casson , vice president/agen- cy manager for the Midwest, to handle legal and under- writing matters for agents and offices in the region as AmTrust Title continues a steady national expansion. “We have rapidly assembled a talented, very experienced team of underwriters in the Midwest,” said Jason Gordon, president of AmTrust. “Sam is an accomplished lawyer whose knowledge and long career in the title industry will perfectly dovetail with the backgrounds of our exist- ing team. We are happy to welcome him aboard.” Just prior to joining Am- Trust Title, Shiel was se- nior underwriting counsel for Palatine, Illinois-based Proper Title LLC, where among other things, he pro- vided title and escrow staff support and training. Before that, he worked for Dallas, Texas-based Title Resources Guaranty Company as vice president & Midwest Under- writing Counsel. n
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INSURANCE COVERAGE FOR INVESTMENT PROPERTIES RISK IS A GIVEN IN BUSINESS TODAY. HOW MUCH YOU MANAGE RISK IS NOT. You may be insured, but is your insurance really covering your needs? Purchasing insurance is a major business expense and probably one of the most misunderstood products you purchase. If not properly covered, you can suffer severe financial losses. COMPREHENSIVE COVERAGE AGGRESSIVE PRICING
Ronald Diskin Associates Corp. A Division of Insurance Office of America (IOA)
JONATHAN DISKIN (973) 599-9600 X44312 CELL: (201) 919-3839 jonathan.diskin@ioausa.com
RONALD DISKIN (973) 599-9600 X44311 CELL: (201) 213-6590 ron.diskin@ioausa.com
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