When it comes to insuring your guesthouse or hunting lodge, it’s important to makes sure you have the right amount of coverage.
Understanding the different terms in your policy can help you to make sure you have the coverage that you need. Two important terms that you should know are “actual cash value” and “replacement cost.” Knowing the difference between these two terms will be important should you ever need to make a claim.
Replacement cost is the cost to replace your lodge, or to repair it with similar materials, without deducting for depreciation. Depreciation is the decrease that your lodge will have over time due to age and wear and tear. The replacement cost value varies depending on your policy, and is usually an amount decided upon at the time your policy is taken out.
Most insurers recommend that your lodge is insured for at least 80% of replacement cost. In some cases, if you do not insure your property for at least 80% of replacement cost value, a penalty may be applied to any claims that you make for partial losses. For example, if your 100,000 lodge is only insured for 50,000 (less than 80% of its value) and you experience a 20,000 loss, then your insurer may only pay for part of the repairs, leaving you responsible for the rest of the costs.
It’s best to talk with your insurer to find out the insurance requirements, as well as terms and conditions, and caps that your policy may have. In many cases, it may be advisable to insure your company for at least 80% of the total costs.
Actual Cash Value (ACV)
Actual cash value is coverage that takes into account depreciation, or the amount of normal wear and tear caused over time. While replacement cost coverage is designed to cover the costs involved to replace what was lost, and restore it to the last known state, ACV takes into account the replacement costs, and subtracts depreciation to come up with the final reimbursement.
Many standard insurance policies cover the contents in your lodge on an actual cash value coverage basis, although replacement cost value for items is available for a higher premium.
No matter how you insure your hunting lodge, it's important to keep track of upgrades or improvements made to your lodge over the years. This can affect the value for which your building and property may need to be insured. Additional improvements that are made to your lodge and rising property values can all affect the replacement cost of your lodge.
If you have any questions regarding your policy, be sure talk with your insurance provider. At Texas Outdoor Insurance, we would be happy to answer any questions you have, and help you to find a policy that covers all your needs.