Legal Definitions - insurable value

Insurable Value

Insurable value refers to the financial worth of an item, property, or interest that is being protected by an insurance policy. It represents the maximum monetary amount an insurance company would typically pay out if the insured item were lost, damaged, or destroyed, based on its agreed-upon or estimated value at the time the policy is taken out or a claim is made.

Here are some examples to illustrate this concept:

• Example 1: A Homeowner's Policy

  A homeowner purchases an insurance policy for their house. The insurance company assesses the cost to rebuild the house from the ground up, including materials and labor, if it were completely destroyed by a covered event like a fire. If this estimated cost is $400,000, then $400,000 is the insurable value of the dwelling structure. This is the maximum amount the policy would pay to rebuild the home.

• Example 2: Valuing a Collectible Car

  An individual owns a vintage car that has been meticulously restored. They get the car professionally appraised, and the appraisal determines its market value to be $150,000. When they insure the car, they declare this $150,000 as its agreed-upon value with the insurer. This $150,000 is the insurable value, meaning if the car is stolen or totaled, the insurance company would pay up to this amount.

• Example 3: Business Inventory Insurance

  A retail store carries an inventory of clothing and accessories. To protect against theft or damage, the store owner insures their inventory. The insurance policy covers the cost to replace the goods at their wholesale value, which totals $250,000. This $250,000 represents the insurable value of the store's inventory, indicating the maximum compensation the business would receive to restock its shelves after a covered loss.