Book Value

An item of real property where the purchase price minus accounting depreciation is recorded as a set value. This is only useful as an accounting term and the actual value of the item may be quite different.

A building that has been purchased will depreciate over the years. Yet that area could be developing and the actual value of the building has appreciated. It is always best to either get an appraisal done or a cost calculator prepared when determining the reconstruction value of a buiding.

Equipment can depreciate at a much faster rate then is shown on the accounting records. The replacement cost is the concern for insurance and co-insurance is applied on equipment and machinery as well as buildings. You also do not want to over-insure.

It is up to the business owner to know the true replacement cost values and to advise the insurance broker or agent. Depending on the size of the business and the amount of equipment and machinery involved these adjustments could be as often as four times a year.

Talk to your insurance adviser as to how frequently you need to review your policy. The recommended minimum is once a year prior to renewal. Take control of your insurance whether it is your home, auto or business.