The whole idea behind insurance is protection. When you buy property insurance for a building, the goal is to have enough coverage so that your insurance claim will put you in roughly the same economic position you were – or as close to it as possible – before disaster struck.
The Three Property Valuation Methods
From an insurance perspective, there are three basic methods for valuing and assigning coverage limits to a commercial property: fair market value (FMV), actual cash value (ACV) and replacement cost. It’s important to understand that these numbers can be very different from each other – and sometimes radically so. The three approaches are not interchangeable at all. It’s very important to understand the type of insurance coverage you own and how claim settlement figures are arrived at.
Fair Market Value
The concept of fair market value is familiar to most of us. A property’s FMV…
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