Replacement Value explained.
Replacement Cost: this is the cost to replace the property/equipment with the same or other similar property of comparable material and quality used for the same purpose without deduction for depreciation. The equipment insured under the Front Row program will be valued at replacement cost in the event of an insured claim. You need to use a replacement cost value to insure your equipment. The cost to replace it new – not the price you paid for it if you bought it second hand.
Because replacement costs can vary, we recommend that you round up the value you choose for your equipment limit (e.g. if you estimate the replacement cost of all your gear as $12,756 CAD, select $13,000 as your equipment limit).
Please note that mid-term changes to your policy limits are subject to a $25 change fee. If you know that you will be acquiring new equipment during your policy term, you may wish to include the value of this equipment in your limit total. Generally, the equipment limit represents the maximum amount that the insurance company will pay for any one claim. It limits the amount that you could receive from a paid claim. It should be adequate to cover the replacement costs of every item insured under the policy.
If you have any questions regarding how your equipment will be valued, please contact our office.
Please note: This policy contains an 80% Coinsurance clause.
This is a clause in an insurance policy requiring an insured to carry a certain percentage (usually 80, 90 or 100%) of insurance in relation to the value of the property insured. The insured shares in losses to the extent that he is underinsured at the time of loss. Under the terms of this clause, property must be insured in an amount equal to or exceeding 80% of its insurable value. Failure to do so will result in a penalty in the event of a loss.
The manner in which the 80% co-insurance clause would operate is illustrated in the following hypothetical example
A) Owned Mobile Equipment is insured on a replacement cost basis for $60,000
B) Actual cost to replace the Owned Mobile Equipment is $100,000.
If your total equipment has an actual replacement cost valued of $100,000 but is only insured for an amount of $60,000, you would be subject to an underreporting penalty in the event of a claim since its insured value is less than 80% of its replacement value.
Minimum amount of insurance required to satisfy the 80% co-insurance clause is $80,000. (80% of B)
D) the amount of loss is $50,000
Application of co-insurance clause formula:
Amount of insurance carried (times) Amount of loss (divided by) Amount of insured required = Recovery
(A) 60,000. X (D) $50,000 / (C) $80,000 = $37,500
This example clearly illustrates the necessity of insurance to value as the insured would only receive $37,500 of the $50,000 loss from the insurance company. Note the amount of recovery never exceeds the amount of insurance carried. For this reason it is important to insure for 100% of the insurable value in order to have enough coverage in the event of a total loss ×