Definition
Insurance Valuation is the process of determining the appropriate monetary amount at which assets should be insured. Different valuation bases—replacement cost, actual cash value, or agreed value—serve different purposes and produce different coverage amounts.
Significance in Alternative Asset Valuation
Proper insurance valuation for alternative assets involves several considerations:
Valuation bases:
- Replacement cost: What it would cost to acquire a comparable item today
- Agreed value: Pre-determined amount established with insurer
- Actual cash value: Replacement cost minus depreciation (rarely appropriate for appreciating assets)
- Fair market value: What the item would sell for in the open market
Key questions:
- Can the item be replaced at all, or is it unique?
- Should coverage reflect retail replacement cost or auction value?
- How frequently should valuations be updated?
- What documentation will insurers require?
Underinsurance is a significant risk when alternative assets appreciate. Coverage based on purchase prices or outdated appraisals may recover only a fraction of current value after a loss.
How Impossival Approaches This
We provide insurance-appropriate valuations that reflect current market conditions, helping ensure coverage amounts are adequate. Our regular valuation updates support the periodic reviews insurers require for high-value coverage.
Related Concepts
• Replacement Cost - Common insurance valuation basis • Actual Cash Value - Depreciation-based valuation • Agreed Value Policy - Coverage with predetermined values • Fair Market Value - Market-based valuation standard