Mortgage Valuation vs Insurance Valuation

A mortgage valuation reports market value, and usually forced sale value alongside it, so a lender can size a facility against realisable security. It reflects land and buildings together, and it is sensitive to location, tenure, planning and marketability.

An insurance valuation reports reinstatement cost. It excludes the land entirely and asks a narrower question: what would it cost to rebuild this structure to an equivalent standard, including professional fees, demolition and debris removal, and an allowance for inflation over the reinstatement period?

The practical consequence is that a well-located property in Nairobi may show a high market value and a comparatively modest reinstatement figure, because much of the value sits in the land. The reverse is common for specialised industrial buildings in outlying areas.

Insuring on market value rather than reinstatement cost is one of the more frequent and expensive errors we encounter. It typically produces under-insurance and the application of average at claim stage.