Accounting 101:

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Credit,Debit

$1500,2.5M Doge

2.5M Doge,0

Bankrupt

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The business lost $1500

You bought a house 20 years ago for $200k. Today, it is valued at $2M. What's your insurance payout if it burns down tomorrow?

Easy answer: you get The value that you insured it for (either replacement cost or actual cash value with depreciation). You definitely wouldn’t insure it for 2M because those premiums would be stupid

Insurance payout is one, albeit unusual, way of selling. If you bought it for 200k, it's valued 2M but you don't sell, are you a millionaire?

And anyway, certainly the appreciation of the value of your home is more dependent on the plot of land and not the condition of the structure.

I didn't buy insurance

If it isn't obvious, your simplified accounting excludes opportunity cost. Actualised losses are much higher (otherwise insurance companies would be marketing the same logic).

The fact you keep changing your answer should be evidence to yourself that you are on the wrong side of the argument. The entire point of my comment is that you are supposed to exclude opportunity cost. Did you lose $1M last year because you forgot to convert your cash to <insert any asset that increased wildly in the last year>?