Residual value insurance
A residual value insurance policy is designed to underwrite valuations of assets at the date of termination of a lease or other type of financing arrangement. Potential beneficiaries of such policies are predominantly providers of asset finance or manufacturers. However business owners and shareholders can also be seen to be potential beneficiaries as shareholder value can be protected or enhanced if balance sheet asset values are protected in this way.
The policy itself could perhaps be better described as a financial hedging instrument rather than a typical insurance policy and its primary purpose is to support asset financing transactions.
It only exists to guarantee the difference between an anticipated residual value and an actual residual value and thus removes asset risk from the equation as far as funding institutions are concerned.
A variety of assets can be insured in this manner including commercial property. Because the existence of such a policy means that lending risk is reduced it may assist in obtaining improved credit terms as well as offering a degree of protection for any lease balloon payments which may be included as part of the overall finance transaction.
[edit] Related articles on Designing Buildings Wiki
- 3D animation for insurance risk analysis.
- Collateral warranties.
- Contractors' all-risk insurance.
- Contract works insurance.
- Directors and officers insurance.
- Environmental Impairment Liability (EIL).
- Flood insurance.
- Gross development value.
- Insurance.
- Latent defects insurance.
- Professional indemnity insurance.
- Professional Indemnity Insurance clause in conditions of engagement.
- Residual valuation.
Featured articles and news
Buildings that changed the future of architecture. Book review.
The Sustainability Pathfinder© Handbook
Built environment agency launches free Pathfinder© tool to help businesses progress sustainability strategies.
Government outcome to the late payment consultation, ECA reacts.
IHBC 2025 Gus Astley Student Award winners
Work on the role of hewing in UK historic conservation a win for Jack Parker of Oxford Brookes University.
Future Homes Building Standards and plug-in solar
Parts F and L amendments, the availability of solar panels and industry responses.
How later living housing can help solve the housing crisis
Unlocking homes, unlocking lives.
Preparing safety case reports for HRBs under the BSA
A new practical guide to preparing structural inputs for safety cases and safety case reports published by IStructE.
Male construction workers and prostate cancer
CIOB and Prostate Cancer UK encourage awareness of prostate cancer risks, and what to do about it.
The changed R&D tax landscape for Architects
Specialist gives a recap on tax changes for Research and Development, via the ACA newsletter.
Structured product data as a competitive advantage
NBS explain why accessible product data that works across digital systems is key.
Welsh retrofit workforce assessment
Welsh Government report confirms Wales faces major electrical skills shortage, warns ECA.
A now architectural practice looks back at its concept project for a sustainable oceanic settlement 25 years on.
Copyright and Artificial Intelligence
Government report and back track on copyright opt out for AI training but no clear preferred alternative as yet.
Embedding AI tools into architectural education
Beyond the render: LMU share how student led research is shaping the future of visualisation workflows.
Why document control still fails UK construction projects
A Chartered Quantity Surveyor explains what needs to change and how.
Inspiration for a new 2026 wave of Irish construction professionals.
New planning reforms and Warm Homes Bill
Take centre stage at UK Construction Week London.