Reasoning Behind Insurance Values
The most common reason that insurance values are higher than auction values is because the insurance company invests more in the property than the auction company.
Insurance value accounts for the amount of money needed to purchase a replacement item and also factors in any expenses involved in replacing the item, such as search costs, authentication, appraisal fees, and shipping.
Market Value vs Replacement Cost
Market value is the estimated price a property would sell for between a willing buyer and seller under fair sale conditions. Replacement cost is the expense needed to acquire and install a similar item that serves the same function.
Valuation Differences
Valuations differ based on purpose. A valuation for insurance determines the replacement cost if an item was lost or stolen, while an auction valuation reflects the expected selling price according to market demand.
What is the Difference Between Insurance Value and Actual Value?
Actual cash value and agreed value insurance provide unique advantages. Agreed value insurance pays a set amount if the car is totaled, while actual cash value insurance pays the depreciated value.
Comparison of Actual Cash Value and Replacement Cost
Actual cash value is the depreciated value of a vehicle at the time of loss, while replacement cost does not factor in depreciation. Stated value auto insurance is when the insured and insurer agree the car is insured for less than its worth.
Banks perform appraisals to confirm the mortgage loan is at or below the home value, and insurance value is for rebuilding, whereas market value is for buying the house.