Each year, VRSA utilizes licensed and independent contractors to complete physical property appraisals for participating member locations. For properties not receiving an appraisal that year, values are trended to account for inflation between years.
The accuracy of property values ensures that property is neither under nor over-insured. In this way, VRSA not only verifies that your contribution is based on your exposure, but that all members contribute based on their scheduled items and receive stable, dependable coverage.
Over the last two years, VRSA has seen the value of members’ insured property continue to increase. There are several key drivers of this historically high trend:
- Labor shortages: The global pandemic has affected the construction industry’s workforce with 72 percent of contractors experiencing project delays.
- Material costs: The cost of building materials (such as lumber, copper, and steel) has increased dramatically over the last year.
- Supply chain interruption: There are frequent disruptions at warehouses and ports, paired with labor shortages.
As construction costs continued to rise, many public entities received funding earmarked for new facilities. With high demand and short supply, building costs in some areas have risen as much as 47 percent from two years ago.
Below is a theoretical example.
A town hall was built in 2019 for $1 million. In 2022, taking average trend factors and the recent increases in construction into account, that same building may now have a replacement cost of $1.25 million or more, depending on material cost fluctuations and increased labor costs.
Vehicles and equipment are not immune either.
VRSA’s unique automobile coverage form is not only based on replacement cost, but for vehicles five-years-old or newer, they are insured for the cost of a new replacement. Vehicle costs have skyrocketed, and vehicles can no longer be replaced for what they cost only a few years ago.
VRSA Senior Account Executive Lisa Schenk recently attended an appraisal conducted by HCA Asset Management at the Blacksburg VPI Sanitation Authority, where Schenk spoke with Director Michael Vaught. You can learn more about the appraisal process in the video below.