Building vs Contents Coverage Allocator
Allocates total property insurance coverage between building structure and personal/business contents based on replacement cost values, depreciation factors, and desired coverage ratios. Helps ensure neither building nor contents are under-insured.
Formulas Used
Straight-Line Depreciation Rate:
Depreciation Rate = Age ÷ Useful Life
Actual Cash Value (ACV):
ACV = RCV × (1 − Depreciation Rate)
Insurable Value is RCV, ACV, or hybrid depending on the selected coverage basis.
Proportional Allocation Weight:
WeightBuilding = Building Insurable Value ÷ (Building + Contents Insurable Value)
WeightContents = 1 − WeightBuilding
Allocated Coverage:
AllocatedBuilding = Total Coverage × WeightBuilding
AllocatedContents = Total Coverage × WeightContents
Coinsurance Minimum Required:
Min Required = Insurable Value × Coinsurance %
Coinsurance Penalty Factor:
Penalty Factor = min(1, Allocated Coverage ÷ Min Required)
Effective Payout = Loss Amount × Penalty Factor
Coverage Adequacy:
Adequacy % = (Allocated Coverage ÷ Insurable Value) × 100
Assumptions & References
- Depreciation is calculated using the straight-line method: equal depreciation each year over the asset's useful life.
- Replacement Cost Value (RCV) is the cost to replace the property with new materials of like kind and quality at current prices, without deduction for depreciation.
- Actual Cash Value (ACV) = RCV minus straight-line depreciation. Some jurisdictions use fair market value instead; consult your policy.
- The coinsurance clause (typically 80%, 90%, or 100%) requires the insured to carry coverage equal to at least that percentage of the insurable value. Failure results in a proportional penalty on claims (ISO Commercial Property form CP 00 10).
- Allocation is proportional to insurable values — the industry-standard method for splitting a blanket limit across building and contents (IRMI Property Insurance Guide).
- Building useful life benchmarks: wood-frame residential ~50 years, masonry commercial ~40–60 years (IRS Publication 946; Marshall & Swift cost data).
- Contents useful life varies widely: office equipment ~5–7 years, furniture ~10 years, manufacturing equipment ~10–20 years (IRS MACRS tables).
- This tool does not account for inflation guard endorsements, agreed value clauses, or scheduled personal property riders — consult your broker for policy-specific adjustments.
- References: ISO CP 00 10 (Building and Personal Property Coverage Form); IRMI Commercial Property Insurance; IRS Publication 946; Marshall & Swift Valuation Service.