What Does Valuation of Assets Mean?
Valuation of assets means knowing the value of, or arriving at an approximate figure for, a property or any item that has commercial worth. The method varies depending on the kind of item or property under evaluation. This is a necessary step before issuing an insurance policy for the property or the insurable item.
Insuranceopedia Explains Valuation of Assets
One type of valuation of assets is the replacement cost method. This simply means knowing the amount that would be needed to replace an asset with the same value. This figure takes into consideration market prices, and the replacement might be lower or higher than the original purchase amount depending on the market price.
The other, more popular method assesses the actual cash value of the item or property. The term is somewhat misleading; because depreciation is factored into the valuation, there is a chance that the value does not match the actual purchase value of the asset.