As I prepare this, south-central South Dakota has seen a major accumulation of snow, and that always puts extra stress on everything, our people, and our buildings. But this is normal, right? Every year we get cold temperatures, wintry weather, and sometimes, an abundance of snow. It’s the time when we can’t open the windows for fear of the air freezing our faces off. The time when we have space heaters under every desk serviced by overloaded electrical cords. You just don’t know when the cord or heater, or anything really, has reached its breaking point and a loss will occur. While this year is no different, I’m inclined this month to talk with you about property valuations and inventory, because I’ve watched, from not far enough, people struggle with putting together an inventory of all their property because they were the victims of a fire.
Regardless of where you are securing your property coverage, it is important to realize that property values and property inventories play a critical role in not only your coverage analysis each year but also become the focus of any property claim. Having proper inventories in place, and an updated property value will save you and your team a tremendous amount of time when it comes to working on your renewals, and also if you have a claim, with your adjuster. Valuations and inventories are not only for the claims and coverage worlds, however, keeping these up to date also assures those you serve that you are properly accounting and caring for the assets of your community.
Property valuations come in a variety of ways. The SDPAA provides a property survey to each Member securing their property coverage with us. This property survey is conducted through our partnership with Safety Benefits and currently serves as the starting point for where your property values should be at the time of the survey. While the SDPAA does help offset inflation by trending each year, we encourage Members to review their property statement of values to determine whether or not their schedules are keeping up with the common market. One word of advice, take a look at your more vulnerable structures, those which are more likely to be damaged by our most common occurrences such as wind, hail, and fire. If you’re unsure what value you should have as you come up to a renewal, review the COPE data for that structure, and then give your local contractor a call, and ask what the approximate rebuild price is per square foot. This will not be an exact number but will give you an idea of whether or not you are in the ballpark. This is generally a cost approach to valuing your structure. If you are aware of a similar structure going up in the area, you can use that as a comparison. This would be a market approach, what is the market doing for structures that are similar to yours?
It is imperative to keep in mind that some of your buildings are unique, and you may not find something comparable, and pricing per square foot is simply not an option given the potential historical or specialized materials used to construct your original building. Another component to consider when looking at your building values is what you have attached to the structure that would increase the building replacement cost. Vehicle hoists, water and wastewater treatment equipment, chemical processing equipment in your swimming pool bath house, coolers, and security systems; each of these pieces of equipment may be affixed to your structure and impact the replacement value of that structure. It’s important to keep these things in mind when reviewing the values that you have associated with your locations.
There’s one other aspect of valuation that comes into play, especially in South Dakota…construction costs are not created equal across the state. The price to build a building, of any kind, is not the same in the Sioux Falls area as it is in Pierre. Rapid City construction prices are different than those in Buffalo County. The cost to rebuild a building varies, so when looking at a market survey, make sure that your survey is appropriate for your area.
Once we’ve tackled and are comfortable with the values that you have on the structures, the next step is the contents. Here’s how we describe contents during Member visits: If you take your building and shake it out, all the smaller items that you keep in their daily… that aren’t attached by more than a plug-in… that’s contents. Contents are not equipment like mowers, tractors, trailers, etc. It’s smaller items like your pens, paper, folders, computers, desks, phones, refrigerators, microwaves, and other items used in the daily activities required to run your entity.
Inventory management is going to help not only with decision-making but also will help to enhance accountability. Inventory doesn’t just mean how the stock you have on hand at the Liquor store, inventory can include making sure you have enough notepads and pens to keep your finance or auditor’s office running smoothly, and printer ink to print the documents needed for your upcoming council or commission meetings. If you’re aware of what you have, it’s easier to make sure that supplies are sufficient to meet your needs, both daily and in advance of a potential emergency. Also, inventory at departmental levels creates accountability. If a department is responsible for its inventory, they will be mindful of what they have, how they use it, and when they need to replenish it. Having a reliable inventory will save you countless hours if you ever have a claim in which you need to provide an inventory of damaged items. Your adjuster will thank you for a spreadsheet of items rather than a notepad full of handwritten notes, which is an approximate best guess of what you think you had. And your department heads will be thankful that they have their inventories ready, so rather than trying to create a list, they can focus on getting things back together.
There are a variety of methods that an entity can use to track inventory, but frankly, the simplest method that uses the technology that each of you has access to is a simple spreadsheet. Contents inventory should include the description of the item, the quantity you have, the serial numbers of those that you have when appropriate, the age of the item – especially for electronics, quantity, and current replacement cost. Using this list, you can determine whether or not you have an appropriate amount of coverage for your contents at an individual location. In my years of claims handling, contents coverage was one area where fire claims quickly eroded the limit of coverage available. Even where the fire doesn’t completely consume the contents, they are rendered unusable either due to the soot damage or water from putting the fire out.
There are always special options available for how you wish to cover your contents, especially when dealing with your electronics. Be sure to talk to your Member Services representative or your agent about whether or not you should be securing any additional coverage for items like computers, radios, iPads, or other items that are not routinely located at a specific location.
Equipment and tools are another special part of your inventory that requires additional attention. Larger items such as mowers, tractors, blades, graders, and vehicles each have a special place to be covered, and that’s not under the contents section of your property form. Inventorying these items is similar to content coverage. Tracking the year, make, model, VIN or serial number and value are critical pieces of information that are needed to ensure that you have accounted for the item and that you are covering it properly.
It’s important to remember that at the end of the day, it’s not your agent, the SDPAA, or your carrier’s responsibility to make sure that your property and inventory values are sufficient, it is yours. Being diligent in keeping your property and inventory values up to date will certainly save you time, and likely money, in the long run. If you need information regarding how the SDPAA addresses property coverage and valuations, please contact any one of our Administrative Team! The SDPAA values the opportunity to serve each of its Members. If you’re not a Member of the SDPAA but would like to be, please check out our website at www.sdpaaonline.org for additional information.
