Is our senior living building insured for enough?

Replacement cost pays to rebuild with like kind and quality without deduction for depreciation. Actual cash value deducts depreciation and is materially worse for an older building. Confirm which basis applies, including on the roof specifically, since roof schedules on an actual cash value basis are increasingly common.

Then check the coinsurance percentage. If the policy carries an eighty or ninety percent coinsurance requirement and the insured value is below that share of the true replacement cost, the penalty applies to every loss, including partial ones. Most operators discover this on a two hundred thousand dollar water loss rather than on a total loss.

An agreed value endorsement removes the coinsurance calculation and is worth asking for on any building where the valuation is uncertain.

Rebuilding a licensed care facility is not rebuilding a commercial building. Current code for a health care occupancy governs sprinklers, fire alarm, smoke compartmentation, corridor width, generator capacity and accessibility, and the building being replaced was almost certainly built to an earlier standard.

That gap is the ordinance or law exposure. It has three parts: the value of the undamaged portion you are required to demolish, the cost of demolition, and the increased cost of construction to current code. Each is a separate sublimit and the increased cost part is the one most often set far too low.

The rebuild also takes longer than a comparable commercial building because of the licensure and plan review process, which is why the business income period of restoration matters as much as the property limit.

A community that loses a building loses census, and it does not get census back the day the doors reopen. Residents relocate and do not all return, and the fill-up curve after reopening can run many months.

That means the period of restoration should be measured as the rebuild plus the lease-up, and the extended period of indemnity endorsement is what covers the second part. A twelve month period of indemnity for a licensed care building is usually short. Ask for eighteen or twenty four.

Get an insurance-specific valuation rather than an appraisal for financing, since the two answer different questions. Update it on a set cycle rather than after a loss. Confirm the ordinance or law sublimits as actual numbers against a realistic code upgrade estimate. And confirm whether the lender or landlord requires a specific valuation basis, because a lease exhibit frequently specifies one.