Get a New Item for Old – Market Value vs. Reinstatement Value Explained : Fire Insurance Secrets
When a fire strikes, will your insurance help you buy a brand-new replacement or only pay for the old, depreciated value ? The answer depends on whether you choose Market Value (MV) or Reinstatement Value (RIV) in your Fire Insurance Policy . This decision can make or break your financial recovery . Let’s decode it with practical cases. 🔥 Fire Insurance – Two Common Basis of Valuation 🔹 Market Value Basis The value of the property at the time of loss, considering depreciation, wear & tear, and usage . 👉 Market Value = Replacement Cost (New) – Depreciation 🔹 Reinstatement Value Basis T he cost of replacing or reinstating the property with a new one of the same kind and capacity , without deduction for depreciation. 👉 Reinstatement Value = Replacement Cost (New, same type/quality) ✅ Best Practices for Policyholders Match your basis of insurance with the correct sum insured : Use MV if you’re fine with depreciated payout. Use RIV if you wa...