Market value defined
Market value is the price a buyer would pay for your home or land on the open market. A home’s market value could be more or less than its replacement cost, depending on the current real estate market.
The market value of personal property doesn’t really come into play for insurance purposes. Rather, insurers tend to look at actual cash value of possessions.
While your home itself might be worth more now than when you first insured it, personal property usually depreciates in value. That depreciated value, also called the actual cash value, or ACV, is what the insurer uses to calculate your reimbursement.
To see how much of a difference that can make with personal property, refer back to the previous example of the 20-year-old washing machine destroyed by a lightning strike. If the insurance company determines that its depreciated value was only $50, that’s all it’ll reimburse you for.
That means you’ll have to pay the difference between the $50 reimbursement and the cost of a new machine.
Factors that affect market value
Market value is based on the closed-sale prices of similar homes. It compares factors such as location, size, condition, improvements, and the home’s features. Market value also considers the value of your land and the local school districts.
Market value is often more relevant to personal property than the home itself, which usually has replacement cost coverage. An exception to that rule is an older home that was built using materials or to standards that are obsolete or too expensive to use in the rebuild.
That type of home might have HO-8, or modified form, coverage that usually only reimburses market value.
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