My blogging is curtailed this week since I will be at the annual AAIMCo conference. AAIMCo is the American Association of Insurance Management Consultants, an association of insurance and risk management consultants, expert witnesses, attorneys, and educators. I’ve been a member since 2016 when I retired from the Big “I”.

This year, I’m on a panel whose subject is “Issue in Property Valuations and Why They Matter When There’s a Claim.” For the most part, we’re discussing why so many real properties, both personal and commercial lines, are undervalued. Our goal is to put our collective minds to work identifying the problems and proposing solutions.

Sometime in the weeks or months following our conference, we will likely publish a white paper on the subject. If so, I’ll post it here and, even if we don’t, I’ll write an article about our session. In the meantime, I thought you might appreciate the lighter side of this issue….

When I was with the Tennessee affiliate of the Big “I”, I once got the following inquiry from a member agent:

“How do you calculate the replacement cost for an earth home?”

This was my initial response that I sent to the agent:

Rhonda, that’s an excellent question. I don’t think that standard valuation methods would work, not that they’re all that accurate anyway. The already laughable room count method wouldn’t work for sure since every room in an earth home would count as a “den.”

While studies show that most homes are undervalued, my guess is that an earth home could be replaced dirt cheap.

And, the really nice thing about an earth home is that you don’t have to worry about termite damage which is excluded by HO policies. But damage by gophers, prairie dogs, and tunneling prison escapees are a real threat and they aren’t covered wither since they’re all rodents and excluded.

In conclusion, I recommend that you consult with someone who has expertise in building these types of structures, either a specialty building contractor…or an undertaker.

Of course, I followed this email with a legitimate one, but in this industry, you have to have some fun when the opportunity presents itself.

Back to the undervaluation issue…if you have any opinions or experiences in this area, please feel free to share them in the Comments section below. I would be very interested in your anecdotal stories, even if you have examples of overvaluation of buildings.

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Bill Wilson

Founder at InsuranceCommentary.com
One of the premier insurance educators in America on form, coverage, and technical issues; Founder and director of the Big “I” Virtual University; Retired Assoc. VP of Education and Research from Independent Insurance Agents & Brokers of America. Reprint Request Information

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