Market value vs. Insurance value
What is Market Value?
Market value is the amount that a buyer would pay to purchase a structure (home/commercial building) and its land in its current condition. Unlike estimated replacement cost, its market value is influenced by factors beyond the material and labor costs of repairs or reconstruction, such as local crime statistics, and the availability of similar structures. Also, the land itself will be included in the home’s market value.
What is Insurance Value?
Insurance value is the cost necessary to repair or replace your entire structure (home/commercial building). When you insure, your insurer will reimburse you for the cost of rebuilding or repairing your structure (home/commercial building) based on the labor and materials needed to do so. This is normally written on a Replacement Cost or Actual Cash Value Basis.
The most appropriate way to estimate the insurance value of your structure (home/commercial building) is to hire a building contractor or other building professional to produce a detailed estimate. Only the cost of the property’s structure and its associated systems, fixtures, and finishes will be included in the estimate; land value is included in a home’s market value but should not be included in the amount of insurance you buy.