Depreciation Reports and Insurance Appraisals: Why Smart Strata Corporations Coordinate Both

In British Columbia, depreciation reports and insurance appraisals are two of the most important tools available to strata councils and property managers. While each serves a different purpose, they are often misunderstood—and rarely scheduled together. That’s a missed opportunity.

In this post, we’ll break down:

• What each report includes and what it doesn’t

  Who uses each report and how

• Why coordinating them makes sense

• How gaps between the two can expose a strata to coinsurance penalties and underinsurance

• What forward-thinking councils are doing differently

Understanding the Purpose of Each Report

Depreciation Reports: Planning for Tomorrow

Under the Strata Property Act of BC, strata corporations with more than five units are required to obtain depreciation reports, with phased compliance deadlines in place for 2026 and 2027 depending on location.

A depreciation report answers the question: What are we responsible for replacing, when will it wear out, and how much will it cost?

It includes:

• A component inventory of common property

• Estimated remaining life of each element

• Projected costs to repair/replace

• Funding models to guide long-term financial planning

Intended users: Strata councils, property managers, owners, realtors, and prospective buyers.

Insurance Appraisals: Protecting Today

Insurance appraisals (or replacement cost appraisals) determine the current cost to rebuild the property in the event of a total loss, as required by Section 149 of the Strata Property Act.

An insurance appraisal answers the question: If our building were destroyed tomorrow, how much insurance coverage would we need to fully rebuild?

It includes:

• Rebuild cost based on current construction pricing

• Allowance for demolition, debris removal, soft costs, code upgrades

• Regular updates to reflect changing costs (often required annually)

Intended users: Insurance brokers, underwriters, councils, and property managers.

Why Coordinating Both Reports Makes Sense

1. Shared Data, Different Purposes

Both reports involve site inspections, cost modelling, and documentation of building elements. Coordinating them ensures consistency across data inputs like:

• Building structure and systems

• Materials used

• Square footage and layout

• Special features (e.g., fire suppression, elevators)

When done together or closely timed, the reports reinforce each other’s accuracy and save time for councils and managers coordinating access.

2. Filling the Gaps

Depreciation reports focus on common property component planning but they’re not designed to include demolition costs, site clearing, permit timelines, or current escalation in reconstruction costs.

Insurance appraisals, on the other hand, do not include service life projections, funding models, or major maintenance forecasts.

Together, they give a complete picture of:

• What needs to be replaced long-term

• What it would cost to replace everything today

• What risks exist due to timing, price escalation, and funding delays

3. Mitigating Coinsurance Risk

Coinsurance clauses in insurance policies are often misunderstood and can result in massive financial exposure.

In simple terms, if a property is insured for less than a specified percentage (usually 90%) of its full replacement cost, the insurer may only pay a proportion of any partial loss.

Example:A building worth $10M is insured for $7M (70%). If a $2M fire loss occurs, the payout may be capped at $1.4M—leaving a $600K shortfall.

Underinsurance often occurs when insurance appraisals are outdated or based on inconsistent data. This is where depreciation reports, done properly, can help reinforce awareness of key components and replacement timelines especially for major items like roofs, HVAC, or cladding.

4. Coordinated Timing = Better Decision-Making

Strata corporations that schedule depreciation reports and insurance appraisals together gain:

• A current snapshot of both long-term and immediate financial risks

• A basis to discuss fee changes or levy planning with confidence

• Improved communication with owners, who may otherwise be confused by differing figures in separate reports

This also builds trust. Well-informed owners are more likely to support proactive planning and less likely to panic when contributions are adjusted.

Case in Point: A Proactive Council on Vancouver Island

We recently conducted a depreciation report update for a low rise, 32-unit apartment-style condominium. The strata had also updated its insurance appraisal just months prior.

By comparing findings from both, we were able to:

• Flag discrepancies in component descriptions (roof type and cost)

• Catch a cost escalation that hadn’t been reflected in the insurance valuation

• Identify code upgrade triggers that would affect rebuild costs in a major loss

The outcome? Better alignment, risk mitigation, and peace of mind.

What Forward-Thinking Strata Corporations Are Doing

1. Scheduling both reports together (or within the same quarter)

2. Using the same firm where possible, or coordinating firms to share data

3. Reviewing findings in joint meetings with council and property managers

4. Educating owners with plain-language summaries and visual aids

Final Thoughts

Insurance appraisals and depreciation reports are not interchangeable. But they do complement each other powerfully especially when timed strategically.

In today’s high-cost construction environment, accurate, defensible numbers are essential. Coordinating both reports helps protect your assets, inform your decisions, and avoid costly gaps in coverage or planning.

Need a trusted partner who does both?

At Jackson & Associates, we combine deep reserve fund planning expertise with rigorous insurance appraisal methodology serving strata corporations across Vancouver Island and beyond.

📩 Contact us to schedule both reports in one coordinated package.