When it comes to property insurance, the Statement of Values (SOV) is often overlooked and undervalued. This simple tool not only makes sure you have sufficient coverage, but also cuts down on the claim processing time, meaning your business can be made whole and return to normal operations much quicker. Here, we’ll dive into the essentials of the Statement of Values.
What is a Statement of Values?
A Statement of Values is a detailed document that lists all the assets of a business and their respective values. This can include buildings, equipment, and inventory. The SOV serves as a foundational element for underwriters to assess the risk and determine appropriate coverage levels and premiums.
Why is a Statement of Values Important?
An accurate SOV ensures that your coverage covers the true value of your assets. Underestimating values can lead to you having to pay out of pocket to rebuild or rebuy the property, while overestimation may overinflate premiums. An SOV helps in striking the right balance, ensuring that you are neither underinsured nor overpaying for your insurance.
What Information Should Be Included in a Statement of Values?
A Statement of Values should list:
- Physical Assets: Buildings, equipment, machinery, and inventory.
- Valuation Details: The cost, purchase date, and current value of each asset.
- Location Information: For businesses with multiple locations, each asset’s location should be specified.
How Often Should the Statement of Values be Updated?
It’s advisable to update your SOV annually or whenever significant changes occur, like acquisitions, property sales, or major capital investments. Regular updates ensure that your insurance coverage remains aligned with the actual value of your business’s physical assets.
Can Errors in the Statement of Values Impact My Insurance Claims?
Yes, inaccuracies in your SOV can significantly impact claims. Underreporting values can lead to underinsurance, where you might not receive enough money from the insurance company to rebuild or rebuy what you lost. As a result, you will have to pay for this out of pocket at the absolute worst time. Conversely, over-reporting can increase premiums unnecessarily. Ensuring accuracy is crucial to minimizing your total cost of risk.
Who Should Be Involved in Preparing the Statement of Values?
Preparation of the SOV should be a collaborative effort involving various stakeholders and advisors:
- Financial Team: For accurate valuation of assets.
- Facility Managers: To provide details on physical assets.
- Insurance Broker/Agent: For insights into what insurers look for in an SOV.
What are the Best Practices for Maintaining an Accurate Statement of Values?
To maintain an accurate SOV:
- Conduct Regular Audits: Regularly audit your assets to ensure all information is current and accurate. How often depends on how much and often your property changes.
- Collaborate with Insurance Professionals: Work closely with your insurance broker or agent to understand what information is critical for your SOV.
- Utilize Technology: Leverage asset management software to keep track of asset values and changes over time.
Conclusion
An accurate and up-to-date Statement of Values is essential to make sure your insurance both covers your property effectively and reduces your total cost of risk. It forms the backbone of your property insurance policy, directly influencing the coverage you receive and the premiums you pay. Regular updates, collaboration among key personnel, and professional advice are key to maintaining an effective SOV. As a business owner, dedicating time and resources to this document can safeguard your business from unforeseen risks and financial losses. If you’d like to receive a free copy of the Statement of Values template we use with our clients, simply email angela@utopiarisk.com.