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Replacement Costs?

In the event of a loss, the last thing you want to be worrying about is whether or not you will be compensated for your losses. You rely on your home and your business for livelihood. It is important to make sure you understand how your coverages will compensate you in the event of a loss.

How much you can expect to be paid for your insurance claim typically depends on three key factors:
  1. How accurately can you describe, document, and show the lost value of your property
  2. The type of policy and coverage you have
  3. “Actual cash value” vs. “Replacement Cost”

In order to make sure you get the right amount of compensation for lost items or property; it is a great idea to keep a detailed inventory of your items. You should keep a copy of the inventory online or at a location separate from the property being inventoried, that way in the event of a total loss you do not lose your inventory as well.  Every insurance company has their own criteria of what they look for at the time of a loss, discuss with your Agri-Services Agency agent for a form or guidelines they use.

You could include the following in your inventory:
  • The item descriptions with make and model, if applicable
  • When you originally purchased the item
  • The price you paid for the item
  • The item’s replacement value (updated annually)
  • Photographs of the item (Update annually)
  • The original receipts, if applicable

The type of policy and coverages you have influences the amount you get compensated in the event of a loss. Different insurance policies provide different coverages. Pay attention to the risks that are covered as well as the exclusions and special limits for certain items. Discuss with your Agri-Services Agency agent what your specific policy covers and if you are correctly covered. You should meet with your agent annually to have this discussion as the items you have and your properties may change year to year, thus your coverage would need to adjust to match those changes.

Actual Cash Value is the depreciated value of an item or property at the time of the loss. This type of settlement does not allow you to replace what you’ve lost, rather it compensates you for the value of the item as if it were sold as is at the time of the loss. Actual Cash Value can leave you in a difficult spot as it is typically not enough to replace that item or property without you also contributing out of pocket.

Replacement Cost provides you with a payment equal to that which would be required to replace the lost item or property. It allows you to be put in the same position you were in prior to the loss and provides you with the necessary funds to replace your items.  

The distinction between Actual Cash Value and Replacement Cost is very important when you are looking to understand how much you could be compensated for in the event of a loss. Your policy should specify which one you are covered for, but it is best to clarify with your Agri-Services Agency agent what your coverages are if you are not sure. 

Before you experience a loss, meet with your Agri-Services Agency agent and discuss your needs. Your agent will walk through all of your questions with you and make sure that you have the correct coverage for your needs. Don’t be unprepared when the unexpected happens.

Give Agri-Services Agency a call today at 1-877-466-9089 to discuss your needs with a qualified agent.