What is the insurable value?

February 3rd, 2023

Qualitam’s team specializes in estimating the cost of reconstruction or replacement of residential, commercial, and industrial buildings. The objective of this mandate is to establish the building’s insurance coverage so that it is sufficient to rebuild in the event of a disaster, while respecting the requirements imposed by Bill 141. In this blog, we will delve deeper into the insurable value.

The 141 law

Quebec’s law 141, also known as the Act respecting insurance companies, defines insurable value as the maximum value for which property may be insured under an insurance contract. This law has been in effect since April 15, 2021.

Act 141 is associated with insurable value because it is intended to protect consumers by establishing minimum standards for insurance policies and providing mechanisms for resolving disputes between insureds and insurers. The 141 law will not help you directly in the event of a claim, but it does give you several rights and resources in the event of disagreement with your insurer. It allows you to verify that your insurance policy meets the standards established by law, and to assert your rights if your insurer denies coverage or provides insufficient compensation.
In the event of a claim, it is important to follow the claim reporting procedures in your policy and work with your insurer to resolve problems quickly. If you have difficulty obtaining compensation, you may wish to contact the Consumer Protection Bureau or the Quebec Insurance Bureau for assistance.

How is the insurable value determined?

The insurable value is determined based on the market value of the property. This value is determined based on the market value of the insured property at the time the policy is taken out. This amount is determined by a member of the Ordre des évaluateurs agréés du Québec and evaluated every five years to consider fluctuations. This may include factors such as size, location, condition of the property and unique features of the property. Here are 3 methods among others that are used to determine this insurable value:
– The comparison method compares the property in question with similar properties recently sold in the same geographic area.
– The salvage method determines the replacement cost of the property in question, taking into account construction and location costs.
– The income approach assesses the market value of a property based on the rental income it can generate.

In summary, the insurable value is used to calculate the amount of insurance required to cover a property reconstruction. As explained earlier, the 141 law allows the insurer to set a maximum amount of compensation for covered losses.

Don’t hesitate to call us and ask your questions to our experts at Qualitam. They are always happy to help you in the procedures.

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