Valuation for insurance purposes, the insurance value of the property

Valuation for insurance purposes, the insurance value of the property

Insurance is one of the most reliable and widely used methods of protection against various risks. Property insurance is an effective way to protect property interests connected to ownership, usage and disposal via the funds generated from insurance contributions.

In order to determine an insurance fee, a valuation of the property for the sake of insurance is required. There are different methods to determine property value for the insurance purpose. Particularly, the property might be valued on the basis of its balanced cost. Often, an insurance valuation is based on actual cash value (ACV), because it reflects the real value of the insured property.

In property insurance, a valuation of the property is used as the basis for the subsequent determination of the insurance coverage, insurance payment, damage level and insurance benefit, so it is important to accurately determine the value of the property. If the value is understated for insurance, the policyholder can certainly save on the amount of insurance payments, but the insurance benefit in case insured event occurs will likely not cover any future costs and losses. On the other hand, inflated valuation of property insurance is also disadvantageous to the policyholder, because the insurance coverage can either match the actual cash value of the insured object, or be lower. Otherwise, the insurance contract is recognized to be void because of the excess insurance valuation over the fair value of the property, and moreover, the overpayment while under the insurance umbrella is not reimbursed.

Insurance companies are equally interested in a fair property valuation. When insurance valuation is heightened, the companies can bear serious damages by paying out benefits, and when it is lowered, they are subject to a number of conflicts, which usually end in court.

Therefore insurance companies are very serious about the properties valuation and often have their own appraisers. When one makes an agreement with an insurer, they have a right to suggest choosing an independent appraiser. This approach is very sensible because the property valuation may be out of their competency and moreover, because the sum of insurance payment may be disproportional to the sum of insured property valuation, the insurer, as a rule, will try to heighten insurance valuations.

Depending on the kind of insurance, the valuation can be conducted before making an agreement or after an insurance-related event. In the case of the later, an independent valuation of the damage incurred should be carried out by professionals.
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