Insurance appraisals: the sense and nonsense of insurers

It often starts with a reassuring thought: “we are insured.”

That thought feels logical and safe, until the moment it is put to the test. A fire, water damage or a serious disruption to business operations already causes enough stress. Yet it is often at that point that the real problem begins. Not with the damage itself, but with everything that follows.

As soon as a claim is reported, the tone changes. Where certainty was expected, questions arise instead. Questions about policy conditions, definitions and values that were once recorded. Slowly, the uncomfortable realisation emerges that being insured does not automatically mean everything is covered as one assumed.

Discussions with insurers after a loss

For many entrepreneurs, this can feel unfair. Premiums have been paid for years, everything appeared to be properly arranged and yet discussion arises at the very moment it truly matters. There is a widespread perception that insurers become difficult or focus primarily on what has not been explicitly defined. From practical experience, this sentiment is understandable.

Insurers operate within a strict framework of rules, definitions and internal guidelines. That framework leaves little room for nuance or tailored solutions, particularly at moments when business owners mainly seek clarity. From a risk management perspective this makes sense, but in practice it often feels distant and impersonal.

Underinsurance of commercial buildings and inventory

What is often overlooked is that the issue usually does not arise at the moment of loss, but in the years leading up to it. Underinsurance is almost never a conscious choice. It develops gradually. A building is extended, an installation is added, logistics become more advanced and intensive, and inventory grows along with the success of the business. Meanwhile, the insured values remain based on assumptions from years ago or on a rough estimate that once seemed broadly accurate.

This is where a gap emerges between the actual situation and what is recorded on paper. In practice, we see that buildings and inventory often differ significantly from the values stated in the policy. That discrepancy remains invisible as long as nothing happens.

Insured value versus actual value

As long as no loss occurs, this does not appear to be a problem. Until it does. At that moment, what was never explicitly recorded becomes painfully clear. What feels logical or reasonable no longer matters. What matters is what has been contractually agreed. For insurers, this is unavoidable. For business owners, it feels as though they are confronted at the worst possible moment with rules they never consciously chose.

For advisors on the professional side, this is not a comfortable playing field either. Discussions quickly shift from practical matters to legal and technical detail, while the entrepreneur mainly wants to know where they stand. This makes claims handling slow and at times frustrating for everyone involved.

Insurance appraisal of insurable values as a solution

A proper insurance appraisal moves that entire discussion forward in time. Not to the moment when damage has already occurred and pressure is at its highest, but to a moment when there is calm and oversight. By having buildings and business inventory independently and regularly appraised, key assumptions are recorded in advance and provide certainty later on. This forms the basis for establishing insurable values in an objective and defensible manner.

Accepted appraisal and statutory protection under NBW 7:960

When such an appraisal is accepted by the insurer, it becomes part of the policy and is legally protected under article NBW 7:960. This significantly reduces room for interpretation. Not because insurers suddenly become more flexible, but because the discussion has taken place beforehand rather than at the moment when interests are greatest. In practice, that difference is substantial.

Claims handling and risk management for businesses

An insurance appraisal does not guarantee that no questions will ever be asked. However, those questions are addressed by experts to experts, relieving the insured party who already has enough to deal with. It also makes risks visible before losses actually occur. Many organisations only realise at the time of a claim that their insurance no longer reflects reality. Without question, that is the most expensive moment to discover it.

The sense and nonsense of insurers therefore lies less in their willingness to pay out and more in the extent to which risks have been objectively defined in advance. Those who assume that insurance will automatically be adequate are unknowingly taking a greater risk than they often realise. Those who periodically establish what their buildings and inventory truly represent create calm, clarity and predictability when it matters most.

Is your insurance still up to date

The question is therefore not whether you are insured, but whether your insurance still aligns with today’s reality. A good insurance appraisal does not prevent damage. That is the domain of other specialists. But it does prevent you from being inadequately insured after a loss. For many organisations, it is unclear when buildings and inventory were last objectively appraised. That lack of insight in itself constitutes a risk. Not because damage announces itself, but because risks often develop unnoticed.

Insurance appraisals by Spring Real Estate

At Spring Business Assets Valuations, part of Spring Real Estate, we provide independent insurance appraisals of commercial buildings and inventory that are accepted by insurers. In this way, we ensure that insurable values reflect reality and that discussions are avoided at the moment when pressure is highest. Would you like to know where you stand? Feel free to contact us for professional and tailored appraisal advice.

Written by Alec Faase, Valuations Analyst