Certified Residential Appraiser Practice Exam

What is typically excluded from insurable value?

1. Buildings

2. Land and site improvements

3. Building contents

4. Cash reserves

The correct answer is: Land and site improvements

The correct answer indicates that land and site improvements are typically excluded from insurable value. Insurable value generally refers to the total value of a property that can be insured. This value primarily focuses on the structures that have a tangible, depreciable value, such as buildings. Land itself is not insurable because it does not deteriorate or have a limited lifespan, so an insurance policy wouldn’t cover it. Similarly, while site improvements can add value, they are often regarded as part of the land rather than insurable property in the same way that buildings are. Site improvements also do not typically involve loss of value due to wear and tear in the same manner as structural elements do. In contrast, buildings represent the physical structures that can suffer damage and have detailed valuation metrics applied to them, which makes them insurable. Building contents are also included since they may be subject to loss through fire, theft, or other risks covered by insurance policies. Cash reserves are not typically connected to property insurance, as they do not represent a physical asset but rather liquid assets that can fluctuate in value. Understanding these distinctions helps clarify why land and site improvements are excluded from insurable value in the context of property insurance.