Market value in insurance is a concept that many people interested in insurance products are unfamiliar with because of its technical origin.
However, it is important to understand what it means when it is applied in policies.
What Is Market Value in Insurance?
First, it should be noted that market value in insurance is the price an asset has on the second-hand market just before a claim occurs.
It is important to know how this market value is calculated, because in some cases and depending on the policy, the amount that can be obtained as indemnity after a claim will depend on it.
Its Application in Policies and Coexistence with Other Values
Market value may appear, among others, in home insurance policies, especially for the building element, as well as travel or vehicle insurance, where it is especially relevant. In short, it applies to products that provide cover for tangible assets.
What Is Considered When Calculating It?
In this type of policy, market value is calculated taking into account data such as the vehicle’s registration date, market rules and the specifications of each make and model.
Depending on the age of the vehicle and the tables periodically updated by the Spanish Ministry of Finance, certain percentages are applied to calculate the market values of cars.
Finally, there are other values related to market value, such as replacement value, which does not include the condition of the asset in the valuation, for example the kilometres driven in a vehicle. Improved market value, meanwhile, falls somewhere between market value and replacement value.
Conclusion
In short, once the concept of market value in insurance is understood, it should be taken into account when applying it in the insurance policy contract.