Total Insurable Value (TIV)
What Is Total Insurable Value (TIV)?
Total insurable value (TIV) is the value of property, inventory, equipment, and business income covered in an insurance policy. It is the maximum dollar amount that an insurance company will pay out on the off chance that an asset that it has insured is considered a constructive or [actual total loss](/genuine total-loss).
Total insurable value (TIV) may incorporate the cost of the insured physical property, as well as the contents inside it, like apparatus and other equipment. In the event that the insurance policy covers a commercial property, loss of income because of damage to the property can likewise be considered into the total insurable value (TIV).
How Total Insurable Value (TIV) Works
Total insurable value (TIV) decides the maximum coverage limit for an insurance policy by conducting a full inventory of a property and its contents. The insurer might give worksheets to assist with sorting out inventory. Businesses could likewise show specific purchase orders and sales records utilized for tax purposes.
For the insured, considering carefully about every thing and its worth is vital. All inventory and different things that are critical to business operations ought to be considered. Exclusion of essential equipment or inventory from total insurable value (TIV) may bring about a costly error subsequent to supporting a loss.
The valuation clause of the policy normally contains the recipe for working out the total insurable value (TIV).
For policies that cover loss of income, insurers estimate the amount of revenue generated by the insured property and utilize this figure as a baseline while deciding the amount of income lost while supplanting the damaged property. The time it takes to reestablish damaged property will change according to the type of business, yet a year window is ordinary.
Illustration of Total Insurable Value (TIV)
A business with a total insurable value (TIV) of $2 million and a commercial property rate of $0.3 per $100 of total insurable value (TIV) will pay an annual premium, the predefined amount of payment required to give coverage under a given insurance plan**,** of $6,000 ($2 million (TIV) x $0.3/$100).
Special Considerations
The higher the total insurable value (TIV) is, the higher the premium will be for coverage. Once in a while, to limit these expenses, property owners might opt to safeguard an amount not exactly the total insurable value (TIV). Alternatively, they could lock in a lower premium by paying a higher deductible — personal costs to be paid before insurance coverage kicks in.
Most policies require the insured to pay a deductible before the insurer covers losses. Now and again, it's feasible to choose for higher deductibles, which commonly bring about lower premiums since the insured accepts more risk and financial responsibility for claims. The insured may likewise be responsible for co-insurance with losses.
Total Insurable Value (TIV) versus Replacement Cost
It's essential to separate between replacement cost and insurable value while picking coverage. Replacement cost is the cost of supplanting damaged things with things of a similar value and type, while insurable value puts down a boundary on how much the insurer will pay for a thing.
It's important to note that the cost of thing repair or replacement might possibly surpass the insurable value.
Features
- The higher the total insurable value (TIV) is, the higher the premium will be for insurance coverage.
- Total insurable value (TIV) is the maximum dollar amount that will be paid out on an insured asset when considered to be a constructive or real total loss.
- The maximum coverage limit for an insurance not entirely settled by conducting a full inventory of a property and its contents.
- Total insurable value (TIV) may incorporate the cost of the insured physical property, the contents inside it — like apparatus and other equipment — and loss of income.
