Contents Modeling: The Intersection between Asset and Risk Management

Modeling contents gives risk managers an effective way to account for what’s inside a building

To secure accurate insurance coverage, risk managers must establish replacement costs for both buildings and their contents. Onsite, physical inspections and value trending based on a previously determined replacement cost are two of the methods used to determine a buildings insurable value. When it comes to getting a handle on the contents, there are also several options.

A complete, wall-to-wall, physical inventory provides accurate, detailed asset records. As an alternative, contents modeling measures the contents of a building (furniture, computer equipment, etc.) and assigns a value without the need of a detailed inventory. For insurance purposes, many people turn to contents modeling as a more cost effective approach to gaining an understanding of the value of their assets.

So, how does contents modeling work?

Leveraging computer models and an onsite inspection, an appraisal firm can help determine a value for the contents of a building. It’s important to note, the details of the approach can be customized based on the valuation needs of each organization.

To estimate a value for the contents of a building, computer models use data such as location, occupancy, and square footage to compare the building being assessed to historical data collected on hundreds of building types. For many appraisal firms, this value provides a baseline upon which to make adjustments based on field observations, regional expertise, and other resources like the U.S. Department of Labor’s Producer Price Index (PPI).

While computers and models are a great resource, one of the most important factors in coming up with a value for the contents of a building is the human element – making adjustments to account for differences above or below the average value of equipment present at each facility. Strong communications between clients and their appraisal partner paired with an onsite physical walkthrough of the building can help identify some of this variation and ensure contents are properly insured.

Working with unique structures

Some buildings house valuable art, others have priceless artifacts and some hold millions of dollars’ worth of computer equipment. When it comes to determining the value of the contents of a building, structures like these require unique attention. Here are a few examples:

  • Water treatment plants and specialized manufacturing structures: Equipment found in these types of buildings can be expensive and difficult to replace. Be sure this equipment is not simply included as part of the value of the building, but assessed on its own.
  • Disaster or emergency operation centers: These buildings are stocked with high-priority equipment that should be accurately accounted for and insured. One challenge is, the equipment might not be stored there all year as some centers are only manned during specific storm seasons.
  • Museums: Filled with priceless artifacts, large museums generally work with specialized appraisers and brokers to value and insure their contents. For other buildings with valuable art, like State Capitol or University buildings, an appraisal firm can adjust the value of the contents model to account for these pieces.
  • Other specialized structures: Some other examples of buildings that require special attention when it comes to valuing contents include science centers, technology centers, dams, designated storm shelters and libraries.

While contents modeling is an efficient way to gain an understanding of the value of the contents in a specific building, adding a human element can help account for the variation a model cannot see. Having an appraisal firm come onsite to inspect the building and contents along with communicating thoroughly about the presence of assets like art and high dollar equipment can help ensure the contents of your building are properly valued and insured.



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