How understated replacement cost values left a client with a $900K uncovered loss
Multifamily Apartment Complex • 440 units across 62 buildings • Southeast Region, USA
A real estate credit lender faced significant financial harm when a building was insured for half of its actual replacement cost. This gap in coverage resulted in a $900K reduction in fund performance.
Borrower understated building values to reduce insurance premiums
Policy endorsements limited coverage to stated values
Buildings insured for 50% of their true replacement cost
Under-insured fire loss results in reducing capex budget and fund performance
We conducted a detailed analysis of the Schedule of Values (SOV) and provided updated replacement cost values to prevent future financial shortfalls.
Compared stated values on the SOV to true replacement costs, identifying significant undervaluation.
Explained the risks of understating values to save premiums, highlighting the potential for catastrophic shortfalls.
Balanced adequate coverage with premium costs to achieve comprehensive protection without overpaying.
The client’s portfolio is now insured to replacement value, protecting against future shortfalls.
$15.5M
Increased Property Coverage
Full complex insured to updated estimated replacement values
Minimal
Coverage Value Gaps
Future risk of shortfalls eliminated
$15.5M
Increased Protection
Uninsured property values now covered
Ensuring that you keep your property values in line with the true replacement cost is critical. Not having the right coverage limits can lead to significant financial losses.
