What is the cost of replacing a building in the case of total loss called?

The cost of replacing a building in the event of total loss is referred to as the "insured value." This term specifically represents the amount for which the property is insured, which typically corresponds to the cost required to replace or rebuild the structure in the current market conditions. Insured value ensures that property owners can recover the necessary funds to restore their building to its original state, effectively covering the expenses tied to rebuilding or replacing the property after a loss.

Understanding insured value is crucial for both appraisers and property owners, as it influences insurance premiums and ensures adequate protection against financial loss. The concept contrasts with other valuation terms that are not focused on replacement costs, such as investment value or mortgage value, which consider different aspects of property financing and investment returns. Value in use also differs as it relates more to the economic benefit derived from an asset rather than its replacement cost.