Handling Replacement Costs

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Last week I attended a class on Commercial Property from the National Alliance for Insurance Education & Research. I found that as much as you think you know, there’s always something new to learn. If one new piece of information comes to light, then it’s worth the 3 day class! The new piece of information that I learned is how replacement cost coverage is handled on “Stock”.

On a Commercial Property policy, coverage for Buildings and Business Personal Property may be written on a Replacement Cost vs. an Actual Cash Value basis. Actual Cash Value, or its acronym, ACV, is a depreciated settlement based upon a negotiated portion of total cost of replacement or repair of the insured’s property. Replacement cost is an insurance settlement based upon the actual cost to replace or repair the insured’s property at the time of loss.

Business Personal Property (BPP) is defined as: office furniture & fixtures, machinery & equipment and stock. Opting for replacement cost coverage on BPP does not give replacement cost coverage to stock (even though it’s part of BPP). You must additionally opt for replacement cost coverage on stock. Replacement Cost Coverage is indicated separately on the insurance policy for Building, BPP and Stock.

A classic example is the plumbing contractor. The plumber has opted for replacement cost coverage for his Building, BPP and Stock. Examples of his Business Personal Property would be: office furniture, photocopier, fax machine, telephone system, plumbing torches, compressor and generator. Stock would be: pipes, tubing and fittings.

Call us to review any coverage questions or concerns that you may have.  At A.G.G., we strive to build you a better mouse trap!

Bill C.
A.G. G
ordon, Inc.

For more insurance information, visit the A. G. Gordon Website.

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