ABSTRACT
In this chapter, valuation practice for insurance purposes is considered with particular regard to the central concepts of reinstatement value and Indemnity Value, focusing the valuer's attention on the important differences from the concept of market value on various bases. The bottom-up approach aims to create a profile of the totally installed cost of the assets whether as stand-alone, process area or functional units from an individual asset perspective. That is, to build up a total installed cost of the site assets. The manufacturers and suppliers of the assets are contacted to establish ‘ex-works’ costs of the major assets. Both firm and budget quotations are typically obtained. Cost overruns in relation to budgeted or estimated costs arise on construction contracts because of many factors such as bad weather, unexpected material cost increases and the inevitable inability to forecast future events with complete accuracy.
