Certified Residential Appraiser Practice Exam

Which value is specifically associated with insurance purposes?

1. Assessed value

2. Insurable value

3. Market value

4. Fair market value

The correct answer is: Insurable value

The value that is specifically associated with insurance purposes is insurable value. This value refers to the amount of coverage necessary to replace or repair a property in the event of a loss. It primarily focuses on the building and its structural components, as well as any improvements made to the property, but it does not include the value of the land itself. Insurable value is crucial for both property owners and insurers because it sets the basis for determining premiums and potential payouts in case of claims. By accurately assessing the insurable value, property owners can ensure they have adequate coverage to rebuild or restore their property to its pre-loss condition without being significantly underinsured or overpaying for unnecessary coverage. In contrast, assessed value is primarily used for taxation purposes and reflects the value set by the tax assessor for property tax assessments. Market value represents the price a buyer is willing to pay in an open market, while fair market value is similar, focusing on a price agreed upon by a willing buyer and seller under normal market conditions. Neither of these values is tailored specifically for insurance needs, making insurable value the correct choice in this context.