What is the insured value of a property?

The insured value of a property is primarily defined as the cost of replacing the structure. This value is crucial for determining how much coverage a homeowners insurance policy should provide in the event of a total loss, such as a fire or natural disaster.

Insurers typically utilize the replacement cost because it reflects the amount needed to rebuild the property using similar materials and construction standards, regardless of market fluctuations. This ensures that a property owner can fully recover from a loss, providing them with the financial resources needed to restore their home to its pre-loss condition.

In contrast, the other options do not accurately reflect the insured value. Market value pertains to what the property could potentially sell for on the open market, which may vary greatly from the actual cost to replace it. Resale value after depreciation focuses on the property's worth over time as it ages and decreases in value, and does not account for replacement costs. The appraisal value based on income is usually relevant for investment properties and evaluates the potential income-generating ability, rather than the cost to rebuild the structure.