Property Value Matters: Unpacking Statements of Value: täielik transkriptsioon

have to add other buildings to that site plan because uh, you might not want everybody to know where your maintenance building is or where the Wastewater treatment plant is or that type of thing so It's great to have a site plan so that you can sit down when you review your statement of values And you can actually check off the buildings as you see them on the site plan and that just serves as another reminder of What buildings are there and you know hunter what? What happens if uh, there's a loss to a building and it's not listed on the uh statement of values Hunter Pettis (07:30) Yeah, so you bring up an excellent question and it's a lot more, well, I won't say a lot more, but it's something that's happened a few times where either the incorrect description is there in terms of the building name or even just the address. The address could be completely incorrect. In that instance, there could be the potential of some issues. when it comes to claims, you know, if you have the incorrect building, it makes it difficult and a challenge to track down the proper location. Who's the who is the actual insurer? What building are we ensuring there? There there's some ramifications on the back end of those of that. If it's not correct, I kind of want to speak to something that you had mentioned, which was the site plan. The importance of it starts, and I kinda wanna make it plain and simple for our listeners is because that site plan is more important for more than just adding this to the policy. We're laying the foundation, we're laying the building blocks. And so having that site plan is important for your statement of values so that you can ensure that you're being... have the correct and short values, you have the correct square footage, but then on the back end of things, when you start to build out your risk management plan, whether it's for fire escape or active shooter drills and things of that nature, you already have laid out the exits for those buildings in those locations. So just kind of keeping in mind that this is really important at the beginning stages, but it's something that you'll end up seeing down the road as well. as you get further in depth with your strategic risk management plans at your individual entities. So I kind of want to speak again to, I know we're talking about the address, we're talking about the description in and of itself, but another common thing that gets overlooked is the square footage of locations. Brian, you're out in the field a lot. kind of getting accurate measurements of buildings and having your measuring wheel and things like that. I don't know if you wanna add anything, any maybe even how would someone even go about if they don't have, if they don't know, if they don't know what their square footage of the building is, what's something that they could do to get that information? Brian Schwab (10:08) Well, that's an excellent question. Thank you, Hunter. And that is something we

do. Hunter mentioned being in the field. That is something that I do when I visit properties is try to verify that the square footage that is listed on the statement of values is accurate. And I'll go into that just a little bit more and answer your question here in a moment, Hunter. But I also wanted to point out that I'm sure many of you may be aware of Varisk, which is a company that we use that comes out and visits your churches and your schools, and then also our own risk control department who visits the residential facilities like camps and academies. But we only get there every five years, roughly. So things can happen in that time. Building additions can be done. New buildings can be constructed. And this summer, Hunter, there was a, as I was visiting different properties, seven out of nine properties that I visited consecutively had major buildings that were not listed on the statement of values. So that, we're kind of backtracking a little bit, but it's easy to overlook. And in all honesty, that happened to me when I was in in working in camp management, completely missed a building for several years. So these things can happen. But going back to the square footage and talking about that that's one thing that we verify, if you have plans for your building, that is one easy way to get the square footage if you have plans. If you don't, Then the next option is to measure the building hunter mentioned a measuring wheel I use a laser measure but in general it's the Your square footage is the outside dimension of the building walls And then you would multiply that by the number of floors in your building and that gives you a rough a rough idea of square footage But uh, you know hunter asked if I had any examples and this summer I visited a property and they had two very large buildings, two very large warehouses. One was 10,000 square foot and one was 50,000 square feet. And I looked at, as I often do, I checked Google Maps, the satellite view and looked at the property before I visited and I looked and looked and looked and I couldn't find this 50,000 square foot building. So when I was visiting with the client and we were going through the statement of values, I said, hey, this told them the name of the building and this is showing at 50,000 square feet. Do you have a building that big? And they're like, oh no, we don't think so. So I said, well, definitely wanna take a look at that. I went out there and measured it and it was 4,100 square feet rather than 50,000. So a significant difference in square footage. And my question to you Hunter would be, you know, what happens if my square foot report on a building is way off? Hunter Pettis (13:27) Yeah, so it makes a huge, I mean, the short answer is it makes a huge difference in premium for one. That's a start. But I know on the on the on the front end of things, if the square footage is over the amount, it's not good for you. But if it's under I'm concerned, I would

be more concerned about the under insurance of things. If your square footage is too low. Brian Schwab (13:52) Yes. Hunter Pettis (13:55) in comparison to what you actually have. You also mentioned just before that there's some instances where the building wasn't on the policy at all. You know, God forbid you have a total loss and you find out after the fact that this building wasn't on there at all. It wasn't listed at the correct square footage. It had the wrong address. All these things, you know, it's a matter of protecting the assets that he has been entrusted to. And I know we all, working for the church, many of us wear a lot of different hats. We tend to be busy. There's some things that we... We may put off a little bit longer than we intended to, just because we have other things going on. But the focus is making sure that we have, as best as possible, to review these documents, whether you have assistants doing it, whether you have help with the accountants from your local account executive, helping you review this document consistently. Because when you have those losses, you wanna make sure that you have enough. coverage limits and as well as enough finances to receive to make you back whole. To make you back whole. So if you don't have those things, it could be extremely challenging. And so I think that actually offers us a well, I think we will have to double back a little bit because I glanced over at the document. I know there's. A thing or two that we actually kind of skipped over someone may be watching say, hey, well, what's this PC thing over here? So I think let's kind of touch on that. So we have PC on your statement of value, which stands for protection class. That's usually a rating anywhere from one to 10. And it has to do with your fire management at your local entity. So that could be inclusive of. Fire alarms, sprinklers, any other fire suppression equipment that you have at your individual location. That also could be inclusive of your distance from the local fire department. I know where I live, the local fire department, I can essentially walk to. So if I had a church in this location, I mean, I would have ideally a better protection class than someone who's in a more rural area. where it takes a fire department maybe 20, 15, 10 minutes, something like that, a lot longer to get to. I don't know if you had anything to add to that one, Brian, but I know I definitely had to touch on that one. Brian Schwab (16:47) No, that's fine. Great. I do have a question, Hunter. Does the protection class play into the construction of my building at all? Is that part of it? You mentioned sprinkler systems, fire alarms, that sort of thing. But does it have anything to do with the type of construction of the building? Hunter Pettis (17:08) Yeah, so I mean the type of construction does make a difference if you had a wood frame building. It's more likely to burn a lot faster than like a mace, joystick

masonry building or something that's made of concrete or even has fire rated doors on the inside or even the roof is fire rated as well. One thing that I don't believe that I mentioned and I did say that the protection class goes anywhere from one to 10. One is more on the excellent side. So if you're building is that choice to make, so he has fire suppression, sprinkler system alarm. All of that is even connected to your local fire department. You'll notice that you have a better protection class than someone who, like you said, is maybe a 10 who have virtually, it doesn't have anything. Maybe it's an older building, wood frame. more likely to burn, doesn't have any fires, any sprinklers or things of that nature. So that goes a long way. And that's also something that is listed on your extension of declarations is the construction type. And I know that that's a little bit more of your expertise in explaining our construction types. So if we could... If you could speak to that and what does that look like, or how would clients best even figure it out? Because if you don't know, sometimes you could look at a building and say, hey, this looks like a wood frame, or this is, I don't know. Is this concrete? What is this? So. Brian Schwab (18:52) That's an excellent question, Hunter. And this is something that I deal with a lot. And I'll be honest with you, it can be challenging for me sometimes to figure out exactly what construction class a building is or construction type. But just to try to briefly break it down, and before I forget, there will be a link with this podcast to a webpage that lists the six, different construction codes. It gives descriptions, it gives examples, there's pictures. That will be a really great source for you. But just as a little background, there are six different types of construction. Basically, what this means is, what are the guts of the building? What are the walls constructed of? What is the roof structure constructed of? You know you might have thinking of your own home You might have a home that's got brick on the outside But the framing of the wall what actually makes up the interior of the wall is 2x4 or 2x6 wood studs So while the building might look like a brick building on the outside it's actually a ISO and they refer to these as ISO classes. It's actually an ISO one frame building. There are some in some instances some of our older churches may actually have walls that are completely brick. That was a way that structures were built many years ago and that would be a different classification that would likely be an ISO two joystick masonry building. And then as far as the roof goes, since I mentioned joystick masonry, basically a joystick masonry building is a building with block or brick walls, but the roof structure is what we're always, most of us are familiar with, which would be wood trusses. with a plywood deck on that and then either shingles or some type of roofing surface. So there are a lot of different, the six different construction classes and when we visit properties, when I visit properties, we do find discrepancies from time to time and we try to correct those. And again, Hunter, I presume that Hunter Pettis (21:09) Mm-hmm. Brian Schwab (21:28) because I don't deal so much on the rating side of things. I presume though that the type of construction, the type of building that I have on my property would make a difference in my rates as well. Hunter Pettis (21:40) Yeah, and I, I can't speak too heavily to that as well, but, and a lot of times it does, it does, uh, assistant in making that a better rating for building that's a joystick masonry versus a frame building also has a better protection class than another. Um, but then at the end of the day, which would be a kind of our next topic is your insured values that that also makes a huge difference in the premium that you end up paying and the type of condition or valuation that you have it listed as. So that gives us great opportunity to segue into more of the fun part of this document, which is the building insured limits and your building personal property. insured limits as well. So the It goes a little bit without saying that the building insured limits Has to do with the building itself, you know, you have a 12,000 square foot building in the in Times Square You imagine that building should probably be insured at a few million dollars, you know versus maybe out in, in Joshua tree, the same building. It's it's significantly less just due to location in and of itself. Nonetheless, the more important part of that statement is that you want to be able to have enough, uh, insured limits. It's, it's kind of a balancing act. So a lot of times we use insurance to cover all of of our loss. Sometimes if you have money set aside, then there isn't a need for insurance to cover it all. But a lot of times, even in our own personal day to day, we may ensure my car, you know, I'll use a great example of my car, I have it insured to its full amount. So that if in the event I had a total loss, I have enough money to go out and get another car. The same principles follow the building. you have it insured at you know 12 million dollars hey you know worst-case scenario we're able to receive 12 million dollars go out build us another beautiful church like kind and quality and I say that without getting into full detail just yet about the differences in valuations so that's what it looks like in terms of the limits themselves and that's for the building Now the personal building, personal property, the best way that I can explain it. And it's this is kind of how I learned it when I first came into insurance is if you had the strength or if you were tall enough or God himself came down and picked up your church, flipped it upside down, shook it like a piggy bank. Everything that falls off the walls. shakes, swarms all throughout the

building, that is building personal property. Otherwise, if it's bolted in, if it's nailed down to the floor, if it's an actual wall or... anything like that, it will be considered a part of the building. Um, a lot of times there, your insured limits of your business, business personal property is a percentage of the building cost. So sometimes it could be a fixed amount. It could be 30%. It could be 20%. Again, this falls heavily on the discretion of the client to make sure that well everything that would be classified as business personal property meets that insured limit, so if you're talking 2.5 million dollars and you're insuring in you're talking 30% that's about 750k does that some hundred and fifty K cover all of our contents in the event of a total loss So those are Those are those that's talking about insured limits. But I know I've mentioned it twice now and I probably should explain a little bit more about the conditions and the valuation. So there are three main types of valuations that we use here at ARM. The most common that we see is replacement costs. Replacement costs has to do with you know, if in the event that you had a total loss, this would allow you to replace and repair any property with materials of similar kind and quality. Essentially your church burns down to the ground and a few months to a year, you have almost the exact same church rebuilt and looks exactly the same. There are a few provisions that replacement costs allows that other valuations don't, which is recoverable depreciation. We all know that we live in a, unfortunately, a time where things are becoming a lot more expensive and the cost of rebuild is one of those things. So, if I'm not mistaken, I'm kind of different. branching off a little bit, but I know in the marketplace, especially in 2022, the average cost to rebuild had increased about 14%, which is huge. And that plates a huge burden on the construction companies, contractors, but this also lends itself to... come full circle and let clients know that it's important to check this document year in after year after year, because in keeping in mind with the price of things going up, it's important to keep in mind that, uh, you're always insured at the, you're not falling into a pit of possibly being underinsured, especially because things are becoming a lot more expensive. One of the other two valuation classes that we deal with, one of them being actual cash value. So actual cash value is very similar to replacement costs. However, actual cash value takes into account depreciation. This reflects the property's current worth in its worn condition. So you have 15-year-old roof. You may have 30-year-old pews. You know, all of these things are taken into account when you're listed at actual cast value. And the last of which is agreed max. So you may have a facility, you know, unfortunately there are some buildings out there. There are some churches, there are some schools where once upon a time they were busting at the seams. They have, you know, ample congregation, a huge student body, but unfortunately those times, don't currently exist. It's not to say that it won't ever get back to there. But taking into account, there may not be a need for a church as large as they currently have, or a school as large as they currently have. They may not be able to afford the premium that's associated with a building as big as theirs. And so that's when Agreed Max comes into account. some instances which we have seen Brian is neglected properties neglected ill maintained facilities agreed max makes a ton of sense that agreed max is hey you know we have this building we still own it we don't really want to sell it want to kind of hold on to it but. It's not as much, it's not as valuable to us as it once was. We may not need or require a million dollars if something happens to this building. Maybe 250, 500 is more than enough for us to be restored and be able to go out and do something different, but it still puts us in a place where we can maintain ministry. And so that's what agreed max looks like as well. So those are extremely important. a valuable thing to keep in mind when you're talking about insured limits and values. I don't know. I know I kind of went off on a tangent there, but I hope that was Simple enough and direct that everyone could understand that one. I don't know if you had Want to add anything to that brain? Brian Schwab (30:42) Well, I had a question for you, Hunter. Another thing that we occasionally see on the line items of the coverage description, because that's what we're talking about here, the type of coverage description, is a business income. What is that for? Hunter Pettis (30:57) Yeah, so in some instances you may have, like I said, a total loss. And when you have a total loss, your property is not, it's not in use. You know, you're, you're. you're shut down for whatever reason. And there are still expenses that you, that you have to account for that needs to be paid. And so business income covers that. You also have a business ordinance and law, which I'm sure maybe not as many, but we do have churches out there that were built quite a, quite a while ways away. you know, a long time ago. And in that, sometimes in certain jurisdictions, they may be grandfathered in, and they may not be required to make certain changes to their facility because it's more of a historical building. But for many locations, business ordinance and law follow, if you had a total loss, it's extra. Brian Schwab (31:39) Yes. Hunter Pettis (32:04) It's an extra limit of insurance that provides you an opportunity to bring your building or facility up to code. So if, you know, there wasn't a need for a fire escape or there wasn't a need for sprinkler system in your facility. But now it's code. It's a requirement for your for your commercial property. Brian Schwab (32:20) Drink low.

Hunter Pettis (32:28) then when you're rebuilding, it's important that you add those things. And so that also tends to be about 10% give or take of the building limit, building coverage limits. So those are also things that are included as well for the client's benefit. Brian Schwab (32:43) Yeah. And business income is helpful. I know when I worked in camp ministry, there were some instances where we had losses. And when you can't use a building, you can't rent out the property. And so it's possible that business income can help in instances like that. So it's a very helpful and very important coverage that's provided. Hunter Pettis (33:20) Yeah, absolutely. You know, you kind of make I hope I didn't want to skip over this because I went through the valuations, but there's something that we actually didn't mention, which was builders risk coverage. Now that's something that we see sometimes as well. So in the if you're engaged in completing a new building or renovating renovation project, the property may need to be adjusted to builders risk. Brian Schwab (33:34) Yes. Hunter Pettis (33:50) coverage, which is temporary. As long as it's under renovation or it's a new build project, it provides you coverage during that process. And it's important for, again, for you to continue to review this, either update your account executive or conference once that process is completed. Unfortunately, I've seen in some instances where the there are some properties that have been under builders risk and they've been listed under that coverage type for extended period of time. Even though the project had been may have been completed two or three years prior. If that building unfortunately had usually in most instances the builders risk coverage limit is a little bit less than. what the actual completed project would be. So if you ended up having a loss, there may be some challenges to figure out, well, what should the insured building, what should the insured limits have actually been? So that's one other coverage type that I think is important for clients to keep in mind. And it's an option. If you are currently having a renovation project going on. Reach out to your conference or your account executive and say, hey, I think we should probably be on builder's risk coverage. And then begin that process. And make sure that you stay on top of it once it's completed to make those changes to either replacement costs, more than likely replacement costs. Brian Schwab (35:30) And that's going to be for new construction as well, right? Not just renovation. And right. And it's, you know, it's really important. I just, as an example, last Thanksgiving, I was at my parents' house and we went for a walk and well, the evening before, I guess, we heard a lot of fire engines and wondered what happened. And the next morning we went for a walk and there was a house just down the street that had burned. Hunter Pettis (35:34) Yes, not just renovations, that could be new construction as well. Brian Schwab (36:01) And it was a brand new house, almost finished construction, but not finished construction. And nobody had inhabited it yet. And it was a complete loss. And that's really the importance of builders risk, is builders risk covers your property. And I'm using the example of new construction. But while you're while you're building because you don't want to invest a lot of money in this property and have something like that happen to it doesn't happen often, you know, and that's, that's one of the challenges with risk management, I think is that we always deal with the small with the chance that something's going to happen. And a lot of times they don't. But but what it does, it can be a huge financial impact to your organization and Hunter Pettis (36:35) It doesn't. Brian Schwab (36:55) And so that's, I think builder's risk is very important to have while you're doing construction projects. Hunter Pettis (37:02) Absolutely, absolutely. It's risk management is all about being proactive. You know, the off the off chance that something does happen. You know, a lot of times we get a bad rabbit. It seems like it's always no, don't do this, don't do that. Or you have to do this. You have to do that. But, um, you know, sometimes claims are, are low, low frequency. They may be low frequency, but Brian Schwab (37:08) Yes. Hunter Pettis (37:26) the severity of these claims, even if they are low frequency, can be extremely high. And the key point and the major point and the major focus of that is avoiding that, that mitigating, I should say that off chance that you have a claim that exceeds the financial pot of of money that you have set aside and now you have no opportunity to rebuild. That's the end of that ministry. You have to start completely from scratch. So it's a protection clause. And I know we work for the church and we may not talk about it and make the correlation nearly as much, but it doesn't stray that much from the church and the principles that we practice just in our faith as a whole. Um, you know, it's, it all boils back to having that strong foundation. And that's what I, you know, someone who constantly practices it. And I don't know if you view this as well, you know, since we both work in risk management, but it offers an opportunity for you to set a strong foundation and to be able to, um, protect, protect your ministry and your churches and your congregation. And that's, it doesn't get much better than that, you know, to even have that option and ability to do such a thing is amazing. Brian Schwab (38:52) And that's why we're here. You know, we're here to, we want to be able to protect your ministry. And that's, you know, that's why we look at these things in detail the way we do, because if there's a loss, we definitely want to be able to cover that loss and to restore your property back to what it was. Hunter Pettis

(39:13) Absolutely, absolutely. I think, I don't know about you Brian, but I think we did a good job of at least setting a foundation and giving clients an opportunity to see what it looks like going line item by line item, fully understanding what needs to be done, what am I looking for, what am I reading? If I wasn't working in... I don't know if I received a statement of values if I would even know what I'm looking at. Brian Schwab (39:39) Well, that's a good point, Hunter. I mean, because when I worked at camp, the risk manager for the conference office would send me the statement of values every year and ask me to go over it. But I didn't know what everything was, and I didn't know what it meant. And we hope that this has helped you just a little bit understand the statement of values better. Hunter Pettis (39:52) Mm-hmm. Brian Schwab (40:01) And if you have questions about it, please contact your account executive. They can help you understand it if you need to make changes. You can work with your conference office, with your account executive, and get the changes made. But yeah, I think it's kind of a deep dive, but it's really important to understand this information, and as I said before, to review it. you know, every year. We don't come and visit the properties every year. Verisk doesn't visit the properties every year. And also, you know, take the time to read those reports. I'll mention Verisk again. You may or may not be familiar with them, but I know when I started as a risk manager at a conference, they had just gone through the Verisk reports. And so I had reports on my desk, I think for almost 200 properties. Hunter Pettis (40:55) Yeah. Brian Schwab (40:55) But I took the time and I read through the reports and I compared those reports to the statement of values and guess what? I found of several churches that have buildings that weren't listed on the policy, you know, so So those things are there do it, you know do it every year do a thorough I know it's a lot of work, but in the long run, you know, it's about it's about protecting The resources that God has blessed us with Hunter Pettis (41:23) Absolutely, absolutely. Couldn't have said it better myself, Brian. Absolutely. Well, I think we've pretty much covered the statement of value. We're just shy of kind of doing a deep dive into the policy after that. But I want to thank all of our listeners. And thank you, Brian, for sitting and having this conversation. I hope that we were able to provide you great information in detail. Again, if you have any follow-up questions, you can reach out to your account executive. Feel free to even reach out to Risk Control Department. We're here, or more on the risk management side, but this is exactly what we do. Veris is a great resource. I do wanna reiterate what you mentioned, Brian, about having those Veris reports. They do provide great estimates if you're unsure about your insured values, at least for the... building side of things. It gives you a good place to start. It gives you a good estimate of what that looks like. Again, thank everybody for joining. This has been Let's Talk Solutions. Again, my name is Hunter Pettis, and this is also Brian Schwab. Thank you again for joining us. And until next time. Brian Schwab (42:44) Bye-bye.