What does 'market value' refer to in property insurance?

Market value in property insurance refers to the estimated price at which the property would sell in the current market. This definition considers factors such as location, condition, market conditions, and comparable sales in the area. Understanding market value is crucial for determining the appropriate coverage amount for a property. It is essential for insurance purposes because it reflects the value that could be realized if the property were to be sold, rather than simply its purchase price or the cost to repair it. This ensures that both the insured and insurance companies have a clear understanding of the asset's worth, which aids in accurately assessing risks and potential payouts in the event of a loss.