14/04/2026
Do you ever ask yourself why the Insurable Value on your property is more than its Market Value?
Maybe this will help you understand why…!
When deciding how much to insure a property for, it’s critical to understand that insurable value and market value measure completely different things.
1. Market Value
Market value is the price your property could sell for on the open market.
It includes:
• The land value
• Location and suburb demand
• Nearby sales and economic conditions
• Future development potential
• Buyer sentiment
Used for: buying/selling, mortgages, investment decisions.
Example: A home may sell for $1.2 million mainly because it sits on valuable land in a desirable area.
2. Insurable Value (Replacement Value)
Insurable value is the cost to rebuild the property from scratch if it were destroyed.
It includes:
• Demolition and debris removal
• Construction materials and labour
• Professional fees (architects, engineers)
• Compliance with updated building codes
• Rebuilding the structure only (not the land)
Used for: insurance coverage decisions.
Example: That same home might cost only $650,000 to rebuild, because insurance is covering the house, not the land.
Core Difference Summary
Market value includes land and demand factors; insurable value focuses purely on rebuild cost.
Which One Should You Use to Insure Your Property?
You should insure your property based on insurable value, not market value.
Insurance is intended to cover the cost to rebuild, not the resale price.
Best Practice Recommendation
To insure accurately:
1. Use a professional replacement cost estimate or building cost calculator
2. Include allowances for demolition and professional fees
3. Review the value every 1–2 years as construction costs change
Bottom Line
Market value = what it would sell for.
Insurable value = what it would cost to rebuild.
For insurance purposes, always use insurable value.
