Define "fair market value" in the context of an insured property.

Fair market value is defined as the price at which property would sell in an open market between a willing buyer and a willing seller, both having reasonable knowledge of the relevant facts. This definition captures the essence of a voluntary transaction where neither party is under duress to buy or sell.

In the context of insured property, fair market value becomes crucial during claims processing and property assessments. It ensures that the property is valued based on real market conditions, reflecting what a buyer would actually pay for it at that time. This definition is centered on the concept of equal bargaining power and informed decision-making, making it the most realistic measure for determining the value of the property for insurance purposes.

Understanding this concept helps in ensuring that coverage amounts are adequate and that the insured receives fair compensation in the event of a loss, aligning the value used in insurance policies with market realities.