EUROPEAN VALUATION APPLICATION - 4 ASSESSMENT OF INSURABLE VALUE

1. EUROPEAN VALUATION APPLICATION - 4ASSESSMENT OF INSURABLE VALUE

2. The purpose of insurance is to protect the insured from loss. The valuations used must assess the extent of that prospective loss if the insurance is to be adequate Valuation for insurance purposes INTRODUCTION

3. DEFINITIONS • In general, the insurable value represents the maximum amount of cover agreed with an insurer • Basis of assessment will usually be recorded in the insurance contract and is likely to be one of the following: - New replacement cost (“New for Old”) - Indexed New Replacement Cost - Depreciated Replacement Cost - Cost of Rebuilding Only

4. The ‘insurable value’ Services Price increases RECOMMENDATION

5. The Cost Approach (or the Contractor’s Method) is used to assess the new replacement cost and the depreciated replacement cost Usually the underlying land does not need to be valued unless it is subject to an identified risk covered by the insurance policy When determining the depreciated replacement cost, allowance should only be made for the depreciation arising from physical deterioration VAT is only taken into consideration if the insured is not entitled to recover input tax. ASSESSMENT METHOD