FMV variance is allowed within which range?

FMV variance is allowed within which range?

• A. +/- 5%
• B. +/- 10%
• C. +/- 15%
• D. +/- 20%

Answer: (B)

Understanding how much fluctuation in fair market value is acceptable when valuing an item for an insurance claim. Fair market value is the price a willing buyer and seller would agree on in an arm’s-length sale at a given time. Because appraisals rely on data such as recent sales, market conditions, and the item’s condition, some variation between credible estimates is normal. A tolerance of plus or minus 10% is considered appropriate because it accounts for typical market differences and measurement methods without letting prices drift too far apart. This keeps settlements fair and practical, avoiding needless dispute over small differences while still guarding against large mispricing. Narrower ranges, like plus or minus 5%, could cause frequent disputes over minor changes, whereas wider ranges, like plus or minus 15% or 20%, would allow larger, potentially unfair price swings.

Understanding how much fluctuation in fair market value is acceptable when valuing an item for an insurance claim. Fair market value is the price a willing buyer and seller would agree on in an arm’s-length sale at a given time. Because appraisals rely on data such as recent sales, market conditions, and the item’s condition, some variation between credible estimates is normal. A tolerance of plus or minus 10% is considered appropriate because it accounts for typical market differences and measurement methods without letting prices drift too far apart. This keeps settlements fair and practical, avoiding needless dispute over small differences while still guarding against large mispricing. Narrower ranges, like plus or minus 5%, could cause frequent disputes over minor changes, whereas wider ranges, like plus or minus 15% or 20%, would allow larger, potentially unfair price swings.