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The League of Minnesota Cities Insurance Trust contracts with HCA Asset Management (HCA) to provide property appraisals to all members. This is done to make sure members’ property premiums and coverage limits are fair and accurate. There is no additional cost for this service.
Members can choose to use and pay for the services of another appraisal firm, but if the values do not seem reasonable, the Trust reserves the right not to use them.
Why appraisals are needed
Appraisals are important because members pay a property premium based on 100% of their property’s replacement cost values. The Trust also provides specific limits on the amount of coverage for each scheduled property, which is based on the estimated replacement cost figures established by HCA.
Members receive an appraisal every seven years. Once appraised, new replacement cost values are given to members’ property. The Trust automatically changes the replacement cost values each year after that by an inflation factor that is given by HCA.
In those years when an appraisal is not performed, the Trust will generally appraise new property that is valued at greater than $1 million. In most cases there is no need for an appraisal on newly built buildings since the construction cost itself is a good indication of the replacement cost.
Appraisal process
The Trust will notify members and their insurance agents about their upcoming appraisal and what to expect. During the on-site appraisal, members should take time to meet with the HCA representative to ask questions, review the process, and evaluate their property schedules.
The process includes HCA conducting an on-site appraisal on all buildings. Property-in-the-open (e.g., golf course property, bridges, and playground equipment) that have scheduled values over $1 million are also appraised. This is required so HCA can arrive at an estimated replacement cost value for each building.
Property-in-the-open with scheduled values less than $1 million and mobile property are not appraised. Instead, the Trust uses values given by members or their insurance agents. That value is increased by an inflation adjustment factor at each subsequent renewal. Help in estimating values is available by request.
After the appraisal
After appraisals are complete, the Trust sends a report to the member’s insurance agent, who then shares it with the member. The report includes the property schedule and the new estimated replacement cost value for those scheduled locations. For each subsequent renewal, the Trust automatically changes the values by an inflation factor that is given by HCA.
Members should review their schedules and contact the Trust right away if it seems the figures do not reflect the following:
- Historical buildings: The estimated replacement cost figures reflect the cost to repair a typical building based on its size, use, type of construction, and so on. The cost to repair or replace a historical building can become much more expensive because of the need to reproduce construction techniques, such as ornate stonework and decorative plaster. Sometimes, these things can greatly increase the cost.
- Unique architectural features: A building that includes unusual or unique architectural features, such as special woodwork and murals, can have similar issues as historical buildings.
- Building code compliance: If an older building doesn’t meet current building codes and it suffers significant damage, it may need to be brought up to current code standards. Sometimes, that can greatly increase the cost.
- Other errors: Watch for any missing locations on the schedule, typos, or values that don’t seem right because a building was remodeled or expanded.
