The Insured Value Of The Mortgage Insurance

The insurable interest of the insured in the insurance subject-matter is one of the fundamentals of insurance and the prerequisite of appraisal of insurance value. The insured must have an insurable interest in the subject-matter. In homeowner's mortgage insurance, the mortgaged house is the subject property, it is also an integrated property of the land with its appurtenant structures, which is charasterized as real estate, that means the land and the buildings on it can not be separated in form and value. Whereas the mortgaged house, as the subject-matter of insurance, is exposed to risk separately with its different parts. Some risks work on the land, others do on its appurtnant buildings, which influences the insurable intrest. Accoding to its risk exposures in all sorts of real estate insurance and relevant insurance clauses, the insurable interest is oriented to the land or to the buildings on land under different circumstances. Correspondingly, we should apply various valuation approaches to the caculation of insurance value and insurance indemnity. Under the context of national owned land ownership and marketable land-use right in China, it is more complicated to measure the insurance value of real property. In insurance business practice, the building insurance clause in mortgage insurance usually applies the real estate value to amount insured, wheras raplacement approach is applied to the indemnity, which causes overinsurance—the amount insured is greater than insurance value. The excess amount is perfectly equal to the land value or a portion of land value, which prejudices the interest of the insured. The overinsurance in mortgage insurance is also a subject worthy of argument in real estate insurance. The concept of ratio of real estate insurance value is proper measurment of overinsurance.This article is based on the principles of risk management and insurance. It insights into the interrelationship among risk, insurable interest and such important factors as insurance value in mortgage insurance, explains the asymmetry of risk assumed and relevant coverage, shows the brand new concept of ratio of real estate insurance value, argues the application of replacement less depreciation approach to the valuation of insurance value in mortgage insurance, and analyzes the valued policy and moral hazard in real estate insurance.