On a work site, when the equipment stops, everything stops. Whether a piece of equipment is damaged by an inexperienced operator, weather events, or theft, having proper coverage and a plan for replacement can make the difference in getting back on track and having a project delayed indefinitely.
And, as we all know, time is money.
An Inland Marine policy is the standard for contractors’ equipment. It includes coverage for valuable business assets that are mobile such as tools and supplies and equipment such as forklifts, dozers, and loaders.
While there are many variables that you’ll want to discuss with your agent about these policies, a major distinction can be found in how your policy calculates the amount you will be paid for a loss.
Replacement Cost v. Actual Cash Value
This approach is generally considered the most beneficial because it allows you to replace your equipment at full-cost. The condition of your equipment and any depreciation are irrelevant. So, if your dozer has been used well for a few years before being damaged by a weather event, that use doesn’t decrease the amount that your policy will pay. You replace the equipment at today’s value and get back to work.
Actual Cash Value
In contrast, Actual Cash Value does take depreciation into account. The ACV paid for a loss equals the amount one could expect to sell that equipment for at its current age and condition in the fair market. In this situation, the dozer described above would have a lesser payout due to the use incurred prior to the weather event. There could also be a delay as an adjuster assesses the depreciation of the equipment in order to determine the Actual Cash Value.
This can be problematic as the insured may be unable to find a used dozer that matches the value to purchase or may simply want to get the best equipment available today. Either way, an Actual Cash Value policy could require extra time and money to get up and running again.
Which is Right for You?
Choosing between Replacement Cost and Actual Cash Value coverage seems like it would generally be an easy choice but insurance decisions should always be made on a personal basis. Looking at the big picture of your coverage and potential endorsements to add to your policies is something that our agents at Compass Insurance Partners specialize in.
At the end of the day you just want to make sure that a disaster, no matter if it’s theft, an accident, or weather-related, doesn’t keep your business out of commission for any longer than necessary. After all, time is money.
Give your local agent a call and sit down to look at the best coverage options for your business equipment.