Michigan Property & Casualty Limited Lines Practice Exam

Market value is the price a ready buyer would pay a ready seller in cash for the property at that moment in an open market. In property insurance, this measure is rarely used because it can swing with market conditions and doesn’t necessarily reflect how much it costs to repair or replace the item. Insurance settlements usually rely on replacement cost (the current cost to replace with like kind and quality) or actual cash value (replacement cost minus depreciation), which more directly address the insurer’s obligation to restore or compensate the loss. Agreed value, while a real concept, is determined by a pre‑agreement between insured and insurer and is not the usual basis for most policies, which is why it’s less common.