What does Insurable Value Mean?

Short Answer

The value of the insurable components of the property.

Definition

Insurable Value is generally defined as:

“The cost of total replacement of destructible improvements to a property; may be based on replacement cost rather than market value.”

What it Means

Insurable Value is most often ordered by lenders concerned with how much they may recoup on the property in the event of total or partial destruction of the premises. It typically does not take into account land value, due to the fact that land is generally considered indestructible within the realm of real estate appraisal.

This type of value is most often used by lenders in combination with a mortgage, as they like to know what the potential is for loss on the property. It is more or less the amount that can be expected to be paid by the insurance company if fire or some other insurable act of nature destructs the building.

Related Topics

Refer to our Value Vault resource section for additional appraisal definitions and appraisal related topics.

 
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