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Is your property or portfolio over or under insured?

Insight Is Your Commercial Property Over Or Under Insured

October 3, 2022

1 min read

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What is a replacement cost estimate and how is it calculated?


A replacement cost is not intended to replicate the original asset (unless a reproduction cost estimate), it is intended that a new building would be able to serve the same purpose as the original building.

The estimate is based on similar design, materials, construction standards and quality of workmanship. To determine the replacement cost for a property, an estimate takes into consideration the following factors and costs.

  • Uniqueness or complexity

  • Age

  • Common elements

  • Bylaws and building code requirements

  • Hard and soft construction costs

  • Industry and geography

Quantity surveyors follow a thorough, regulated process adapted to the type of building, the needs of the owner or board, and whether the assessment is an annual update or a comprehensive evaluation. This process includes:

  • Collecting and reviewing documentation from the owner or property manager

  • Physically inspecting the property when possible

  • Preparing a dependable replacement cost estimate report

  • Measuring the building area from the plans provided (if available)

  • Benchmarking with similar properties

  • Estimating construction costs

A regular professional replacement cost estimate for a commercial or residential property will confirm the right insurable value – and ensure that as an owner, director or manager you and this asset are sufficiently insured and well protected.

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