What is Replacement Value?
The amount it would cost to replace an artwork with the same or similar image, and of the same or similar substrate, image size, and edition. Comments: – One of the most common situations for collectors involves appraisal for insurance coverage. With valuable antiques, decorative arts, fine art insurance companies require these items to be scheduled separately and to have the amount of coverage supported by an independent appraisal. The type of value that usually is required in this circumstance is replacement value. This means the amount of money that would be required to be paid in the marketplace to replace a property with one of like kind and quality.
In the broadest sense, replacement value is the total cost involved in replacing damaged items with new items. Depending on the item that must be replaced, the value may be less than, equal to, or even more than the purchase price of the damaged item. Calculating the actual value will depend on whether the item has appreciated or depreciated in value, and whether or not there is a way to replace the item with something of similar value. The concept of replacement value is often included in various types of insurance coverage. Homeowner’s insurance typically covers the cost of replacement associated with repairs that must be done to the house or other buildings on the property if they are damaged by fire or some type of natural disaster. Both homeowner’s and tenant’s insurance normally provides coverage on personal items such as furniture and other belongings and will provide the policy holder with reimbursement based on the replacement value of items that are damaged or stolen. Typical
When you purchased your home and took out a mortgage, you most likely were required to purchase property and casualty insurance for your home as well. The cost of replacing your home over the past years since you signed on the dotted line has risen significantly, but your coverage may not have kept pace. If there is a fire in your home, you will need to replace, rebuild or knock your home down and start all over again. Building materials such as concrete, wood and steel have risen in price due to demand, inflation and tougher building codes. Wood used in construction has risen over 20% since 2003. If your home is significantly damaged, your coverage may not do the job in restoring your home to its original glory and comfort. Look for a rider to your policy that increases coverage yearly or check out property values in your neighborhood and make sure that your policy is adjusted accordingly. However, keep in mind that the land you live on has value in and of itself apart from the value
