Insurance vs Probate Valuations — What's the Difference?

Insurance valuations and probate valuations may both involve the same item, but they answer fundamentally different questions. An insurance valuation asks: "How much would it cost to replace this item today?" A probate valuation asks: "What would this item fetch if sold on the open market on the date of death?"

These two questions produce very different figures. An insurance valuation is almost always higher than a probate valuation, sometimes by a considerable margin. Using the wrong type of valuation can result in overpaying Inheritance Tax, underpaying it, or having your estate assessment challenged by HMRC.

Understanding which valuation you need — and when — is one of the most important responsibilities facing an executor.

Probate valuations are based on Open Market Value (OMV). This is defined as the price an item would reasonably be expected to fetch if sold on the open market at the date of death. In practice, this often equates to the price the item might achieve at auction.

Open Market Value takes into account the condition of the item, current market demand, and comparable recent sales. It does not factor in sentimental value, original purchase price, or what it would cost to buy a replacement.

For HMRC purposes, the date of death is critical. Market conditions on that specific date determine the value, not what the item was worth a year earlier or might be worth in the future. This is why probate valuations must be carried out by professionals with access to current market data and auction records.

Insurance valuations are based on replacement value — the cost of replacing an item with one of equivalent type, quality, and condition from a retail source. This figure is designed to ensure that, if the item is lost, stolen, or damaged, the policyholder receives enough compensation to buy a like-for-like replacement.

Because retail prices include dealer margins, VAT, and other overheads, the insurance replacement value is typically 50% to 100% higher than the Open Market Value. A diamond ring that might fetch £3,000 at auction could carry an insurance valuation of £5,000 to £6,000.

Insurance valuations are updated periodically — usually every three to five years — to reflect changes in retail prices and market conditions. They are not tied to a specific date of death and cannot be used in place of a probate valuation.

Submitting an insurance valuation to HMRC in place of a probate valuation is one of the most common and costly mistakes executors make. Because insurance values are significantly higher, using them on the IHT400 form means the estate will be assessed for more Inheritance Tax than is actually owed.

Conversely, if a probate valuation is used for insurance purposes, the item will be underinsured. In the event of a claim, the payout would not be sufficient to replace the item.

The consequences of using the wrong type of valuation can be summarised as follows:

The following table summarises the key differences between insurance and probate valuations. Referring to this comparison can help you ensure that the correct type of valuation is used for each purpose.

When instructing a valuer, it is essential to specify clearly whether you require a probate valuation, an insurance valuation, or both. Many qualified valuers can provide both types in a single appointment, but they must be reported separately and used only for their intended purpose.

If the deceased held existing insurance valuations, these can be useful reference points but must not be submitted to HMRC as probate values. Similarly, if you obtain a probate valuation during the estate administration, do not rely on it for ongoing insurance cover of items that are being retained by beneficiaries.

A qualified valuer will understand the distinction and ensure that each valuation is prepared using the correct methodology. If you are unsure which type you need, a professional can advise you based on your specific circumstances.