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

This query is : Resolved

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.