Replacement value: the inventory your balance sheet cannot provide
Separate book values from the cost of rebuilding your working business.
Start with the operational bottleneck
Accounting depreciation and insurance valuation serve different purposes. A fully depreciated machine can still be essential and expensive to replace. Conversely, an insured replacement-value basis may have conditions that an old item does not meet. Review equipment, stock, fixtures and goods belonging to others separately. Your target is a defensible valuation by category, not a single round number copied from the balance sheet. Transport, installation and commissioning can matter as much as the purchase price.
A hypothetical business case
Imagine a small manufacturer whose accounts show CHF 20,000 for equipment that would cost CHF 180,000 to source and install today. These invented figures describe a valuation gap, not an insurer rule. The owner has also accepted customer materials for processing. If the insurance schedule only reflects owned assets, the discussion may omit those goods. Build a replacement budget item by item and identify both ownership and contractual responsibility for everything held on the premises.
Physical damage and lost income are different
An installation quotation should identify dismantling, delivery, commissioning and compatibility work. A cheaper modern substitute may still require adapting power or ventilation. Discuss betterment and obsolete equipment explicitly; replacement cost is not necessarily the price of an identical second-hand asset.
Compare quotations using this scenario
Ask each insurer to explain replacement value, actual value and any agreed-value arrangement in the proposed wording. Check underinsurance provisions and whether a declared sum applies by location, category or overall. Clarify inflation adjustments and costs such as debris removal or professional fees rather than assuming they sit inside or outside the principal limit. Compare identical asset schedules so that a cheaper quote cannot conceal a smaller declared exposure.
Prevention that changes the outcome
Create a photographed inventory and update it when major assets arrive, leave or move sites. Capture serial numbers and installation costs, and store a copy away from the premises. Ask specialist suppliers for replacement estimates for unusual items. Distinguish obsolete assets you would not replace from equipment essential to current production. This exercise can also reveal unnecessary concentration in one room or one location, which is a prevention issue as well as an insurance issue.
Build the evidence before a loss
Gather invoices, supplier estimates, lease agreements, ownership records and the last inventory count. Record valuation dates because prices and availability can change. Keep the distinction between stock at cost, selling price and the policy’s valuation basis explicit. Where several entities use the same premises, establish which insured entity owns each item. Clear records make the review faster and reduce the chance that a later loss becomes a debate about what existed before the damage.
Turn the findings into a decision
The decisive output is an insured asset schedule that can be reconciled to a real inventory. Explain significant gaps between book value and replacement estimates rather than concealing them inside one overall figure. Identify ownership and location for rented, financed or entrusted goods. Have the insurer confirm the valuation basis and treatment of installation expenses. Store the approved schedule with the evidence used to build it. When equipment moves or prices change materially, the review should follow the assets instead of waiting automatically for the next annual premium notice.
Sources and further reading
Original Clearwise analysis. External reporting provides context; rules and contract terms must be verified with the competent authority or provider. Some press articles may require a subscription.
Apply this to your situation
Compare your actual documents and clarify what matters before making a commitment.
Request a free consultationGeneral guidance, not a binding quote or personalised legal, tax or investment advice. Examples are hypothetical and results are not guaranteed.
