Insurance terms that you should know.
Copyright © 2008-2013 Saine-Summer Insurance Agency
118 East Main Street • P.O. Box 250
Peru, Indiana 46970
Market value: what you would get if you sold your property - the selling value or what a willing
seller would accept from a willing buyer.
Depreciation: an allowance for accrued functional obsolescence. Factors which are deemed
relevant for insurance purposes include general condition, physical deterioration, age, utility and
remaining serviceable life. For example, the normal life of a roof is 20 years. If a roof is 5 years
old, 25% depreciation would apply if the policy was written on an actual cash value or market
Actual cash value: the rebuilding cost of the property today in its present condition less
depreciation for "wear and tear."
Replacement cost: the cost of providing replacement of the property without a deduction for
depreciation. This is, generally, today's estimate of the cost to rebuild your property. Depreciation
is not considered. Replacement cost is usually determined by local building costs. Sources are
engineering services like Boeckh's American Appraisal, local contractors, or appraisal
Co-insurance: the insurance applying in the following example is subject to 90% co-insurance
clause. Under the terms of this clause, you should insure the property at risk to a minimum of
the stipulated percentage value. If you fail to do so, you will not be fully reimbursed for any loss
that may occur. The manner in which the co-insurance clause would operate in the event of a
partial loss is illustrated below and is merely a hypothetical example:
The computation formula is "did over should." the insured carried $60,000, but should have carried 590,000. (up to $100,000 could have been carried).
Saine-Summers Insurance Agency