Reinstatement Value and Market Value are the only two methods to settle the claims under fire insurance. Meaning of these two terminologies is totally different and thus its distinction needs to be well understood.
If Reinstatement Value is opted, then in any event of mishap, the Insurer will settle the claim at the value of the damaged/lost property for its current replacement cost. Under Reinstatement Value policy, the sum insured will be higher which attracts higher premium as compared to that of Market Value one. It is advisable to insure the property/assets under Reinstatement value.
But under the Market value, the claim will be settled after charging depreciation depending upon the usage of the assets on the replacement value. Insurer generally issues the policy on Market value by default unless someone specifically seeks for the Reinstatement Value one.
How to calculate the Reinstatement Value of the property is explained in the following tips.
How to calculate the Sum insured of Building under Fire Insurance for Reinstatement clause
How to calculate the Sum insured of Plant & Machinery under Fire Insurance for Reinstatement clause