Key Insurance Terms: Determining Value

Knowing these terms helps to understand the process insurance agencies and relief organizations use to determine the value of your loss. Your tax accountant can also help you when claiming your losses.

  1. Valuation of Goods
    • It is very difficult to measure your personal loss of goods. This is because many items have a sentimental value to you.
    • You need to know that it is the objective measure of value that the insurer and the IRS will use for discussion.
  2. Cost When Purchased
    • This is an important element in establishing an item's final value. Receipts will help verify the cost price.
  3. Fair Market Value Beforehand
    • This concept is also expressed as ACTUAL CASH VALUE. This is what you could have received for the item if you had sold it the day before the event. The price would reflect its cost at purchase minus any 'wear and tear' it sustained since purchase.
    • Depreciation is the formal term used to express the amount of value an item loses over a period of time.
  4. Value After the Loss
    • This is sometimes called the item's salvage value.
  5. Direct Storm/Fire Losses
    • Financial losses of the damaged structure and contents. This may be covered by homeowners insurance.
  6. Indirect Storm/Fire Losses
    • Financial losses such as the cost of temporary living arrangements, medical expenses or lost income due to time lost from your job. This may be covered by homeowners and medical insurances, with the exception of lost work time.