| At the heart of being an independent agent is the client conversation. Whenever possible, we provide key talking points to help you communicate effectively with your clients on important topics. That’s why the Big “I” Markets affluent team is sharing the following talking points to help you respond to questions or concerns regarding the replacement costs of your clients’ homes when using the AIG affluent homeowner market available through BIM.
- An insurance replacement cost estimate is not equivalent to market value, which is what one would expect to receive from the sale of a home. Insurance valuations are reconstruction cost estimates, like contractor bids. They factor in the cost to rebuild a home with the same unique features, designer finishes and professional fees.
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Just like a contractor bid process, different companies’ estimates can vary. If the AIG estimate is within the construction industry average 10% spread, the difference is not unusual. Estimates that differ by more than 10% would likely require an in-depth comparison.
- Your clients also should consider the following additional factors when reviewing third-party reconstruction cost estimates:
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20% overhead and profit – Even if this is more than what the contractor is currently charging, in the event of a loss AIG pays 20% overhead and profit to ensure the highest quality of work.
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Architect and engineering fees – These fees are significantly higher in disaster-prone areas, because homes must be built to withstand extreme events such as hurricanes, tornadoes, earthquakes, and floods.
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Foundation – Some contractors will provide estimates that do not include foundation costs, since they assume nothing will happen to the foundation in the event of a loss. However, AIG offers your clients the option to receive a cash payment and/or rebuild on a different site. Consequently, these costs must be included.
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Interior designer fees – These costs are often incurred when a home is rebuilt.
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Specialty interior finishes – In large custom homes, the contractor's bid typically does not include furnishings that are considered late in the process. Designer or antique chandeliers, closet built-ins, window treatments, home theaters and electronic systems are often added later.
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Designer name brand items – Most contractors do not take the time to research the designer brand finishes in the home before they write a bid letter. As a result, items such as kitchen cabinetry or plumbing fixtures are not adequately noted if they are a specific designer brand—like Poggenpohl or Sherle Wagner. We replace designer name for designer name, import for import and antique finish for antique finish, which often is more expensive.
In addition, AIG has also provided an overview flyer designed to be shared with clients to help them understand Renewal Inflation. Please
download it here, review it with your staff, and share as needed. Questions or want to learn more? Log into Big “I” Markets, or reach out to Affluent Department Supervisor & Senior Underwriter Aysha Jordan by
email or direct at (703) 706-5382. |