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The Importance of Valuation for Insurance

By July 20, 2022June 17th, 2024Blog2 min read
The Importance of Valuation in Insurance


Insurance is an instrument that’s used to safeguard the insured from a potential loss. In the event of an actual loss, insurance coverage ensures that the insured can regain their original financial situation.

The Problems with Insurance:

Under Insurance & Over Insurance are the biggest problems faced by the insured when trying to arrange settlement of a claim to replace property or interruption to their business

1. Under Insurance occurs when something is insured for less than its true replacement value, which results in inadequate insurance coverage. 

The outcome: If a claim is made, an underinsured company is not compensated enough to replace the damaged assets.

2.Over Insurance can occur when an insured has purchased too much coverage, and the coverage actually exceeds the value of the property or the risk that is insured. 

The outcome: An over-insurance scenario results in the company paying more premium than necessary and incurring a loss.

Importance of Valuation for Insurance:

Companies may not always be sure of how much insurance coverage to be taken for their assets/premises etc.

Hence, it is essential that asset valuation is tailored to the requirements of the company considering the specifics & extent of risks that may arise.

The valuation of assets is necessary to determine their Replacement Cost and, therefore, their insurance coverage. 

In the event of a mishap, an accurate valuation reduces a company’s risk & helps to restore its assets.


Having a professional Insurance Valuation undertaken will ensure that:

  • Nothing is left uncovered
  • The Insured values are correct
  • The correct premium is paid