Market Value
What Does Market Value Mean?
Market value, in the context of insurance, refers to the price an insured asset in its current condition could fetch in a competitive market from a willing buyer. It differs from other valuation methods, such as replacement cost, actual cash value, or trade-in value.
Market value is sometimes referred to as open market value or fair market value, though these terms may carry slight distinctions depending on the context.
Insuranceopedia Explains Market Value
Market value plays a crucial role in determining the amount of coverage needed for property insurance and influences the premium cost. Typically, market value-based policies cost less than agreed value policies. However, in the event of a loss, the insurer’s payout may differ from the market value stated in the policy, as property can depreciate over time.
Since market value fluctuates based on current market conditions and industry guidelines, it is not a fixed figure. Policyholders with this type of coverage are advised to properly care for and maintain their property to preserve its resale value, ensuring a higher market value in the event of a loss.
