At least once a week we get asked the question by a client - Is the Insurance Valuation the same as the Market Value of my property? Obviously this question comes up more with commercial assets such as industrial properties, not strata properties.
The answer is: They are completed unrelated.
The market value includes the value attributed to the land which is influenced by location, aspect, views, noise, amenity and many other factors. It also depends on the condition of the buildings which effects its marketability and appeal.
The insurance value however is simply the cost to replace the buildings to the same extent as currently exists to a condition similar to that when it was new. On this basis, theoretically a building located in Elsternwick could cost very close to re-build (and therefore insure for) to the same exact building in Pakenham. Whilst the Insurance Value's would be fairly similar, the market values would be vastly different.