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Caffery, Oubre, Campbell & Garrison, L.L.P.
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What can happen with outdated ITVs

Naturally, when a homeowner or business owner purchases an insurance policy, it is with the expectation that they will have proper coverage should a disaster strike and inflict severe damage to their property or interrupt business operations.

Most polices are purchased and valued based on the Insurance to Value (ITV) assigned to the property. This is an estimate of the coverage needed to bring a property back to its previous state after being damaged. Because of this, the accuracy of the ITV is key when a claim is issued, and disputes may arise when an ITV is less than what is required.

This post will identify a few things that may happen when an ITV is inaccurate.

Undervaluing properties – As we alluded to earlier, an ITV is determined in part by a property’s value. However, if a property is undervalued (i.e. identified as being less than the appraised value) this could leave the property underinsured. This can be problematic when an insurer relies on an outdated valuation to establish an ITV.

Exhausting policy coverage – When coverage is based on an outdated valuation, even a partial loss can exhaust policy coverage, leaving the property vulnerable when a total (or near total) loss occurs.

Losing future business – Dissatisfied customers can be quite vocal over social media when their policy does not cover the extent of damage they suffer, especially when they were informed that they previously had proper coverage.

In these instances, it is important for an insurer  to regularly revisit coverage limits regarding a property’s value.

The preceding is presented for informational purposes only.

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