What is a common technique used for valuing property damage in insurance?

A common technique for valuing property damage in insurance is replacement cost estimation. This approach involves determining the cost to replace damaged property with new materials of like kind and quality, without accounting for depreciation. This method is widely used because it aims to restore the insured property to its pre-loss condition, ensuring the policyholder can rebuild or replace what was lost.

Comparative market analysis primarily focuses on assessing value based on current market conditions and comparable property sales, which may not accurately reflect the cost of replacing damaged items. Cost-plus pricing is more relevant in a business context where pricing is based on production costs plus a markup, rather than in property damage valuation. Depreciation calculation considers the loss of value over time, which does not typically provide a direct estimate for the cost necessary to replace property as it existed prior to the loss. All these options have their place in property evaluation but do not align directly with the common practice of determining the value for insurance claims as effectively as replacement cost estimation does.