Gross Value or Net of Depreciated Value of Assets For Insurance Purpose

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When insuring assets against fire and perils, it's generally recommended to use the gross value (actual cost) rather than the net value after depreciation. Insuring at the net value can lead to underinsurance, meaning you might not receive enough compensation if a claim occurs. Policies often cover the replacement cost, meaning depreciation isn't deducted during claim settlement, ensuring you're fully covered.

SIDDHARTH MAHESHKUMAR SHAH

SIDDHARTH MAHESHKUMAR SHAH (Querist)
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07 June 2025 Dear Sir,

Please guide - Which amount to be considered for Fire and Perils Insurance of Assets:

1. Gross Value (Actual Cost)
2. Net Value (Gross Value - Depreciation Value)

Thanx

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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07 June 2025 For fire and perils insurance, the sum insured should ideally be based on the gross value or replacement cost value (actual cost to replace the asset) rather than the net value after depreciation.
Insuring at net value (after depreciation) risks underinsurance and inadequate compensation in case of loss.
If the policy is on a reinstatement or replacement cost basis, depreciation is not deducted when settling claims, ensuring full recovery for the insured.

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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28 September 2025 Good luck.....

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