Insurance value vs. Replacement Value

DustyRusty

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BX23S
Nov 8, 2015
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I recently got into a discussion with my insurance agent about the value of my tractor should it be stolen or damaged beyond repair. Presently it is insured with all the attachments for $30,000, which is close to what I believe that I have invested in it. I stopped at the Kubota dealer to see what it would cost to replace it at today's prices, and it is just shy of $50,000. Since the policy is stated value, I have the option to increase the values of the tractor/cab/accessories to the current market value. It appears that the increase in costs keeps going up, causing the value of the used market to follow. The cab that I paid approximately $5500 now costs $10,000! Those that don't have KTAC insurance, how do you insure your tractor, replacement cost, or used market value?
 

NCL4701

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L4701, WC68 chipper, grapple, BB1572 box scrape, Howes 500, 16kW IMD gen
Apr 27, 2020
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Central Piedmont, NC
In my area I don’t have an option to specifically insure it, or the implements, for anything other than market value at time of loss (also known as Actual Cash Value or ACV in the insurance world). The only way I could potentially get replacement value insurance would be to hope it would qualify as unscheduled personal property on my Homeowner policy as a vehicle used to “service the residence premises” (kind of like a really big lawnmower). Some policies require it be used exclusively or primarily to service the residence premises.

Due to the use of mine that’s kind of a dice roll I’m willing to take on the beat to crap 8N with a $1500 market value and probably $20k replacement cost. I’m not willing to be in that gray area with a bunch of equipment with an ACV more around $40k. With my use of the Kubota, the Homeowner Coverage C (contents) handling it is definitely a gray area. Specifically scheduling it also provides additional coverage for collision, rollover, and a few other things the Coverage C on the Homeowners doesn’t cover. If I could schedule it for replacement cost value at a reasonable cost v ACV coverage I would. I just don’t have that option so the higher dollar stuff is all scheduled specifically to give it definitive coverage anywhere in the US or Canada. Costs me about $300/year for about $40k in coverage. As you pointed out, the ACV is probably about the same as what I paid for it shortly pre-pandemic.

I also have a liability endorsement on my policy that provides off premises liability coverage.

The options and requirements vary quite a bit from state to state and also based on usage so a definitive answer of what is best is hard to say without some local expertise. For me an Inland Marine with Farm Bureau specifically insuring all the high dollar stuff at ACV and a personal use off premises liability endorsement is a good fit and the best I can do to cover it.

Others with different usage or in different areas may have better options.
 
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RBsingl

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Kubota F 2690 72" rear discharge deck, Deere 955
Jul 1, 2022
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Central IL
I also have a liability endorsement on my policy that provides off premises liability coverage.
This part from NCL4701 is a critical issue a lot of people miss. Make sure that you have liability coverage because the potential financial loss from that is far greater than the cost of replacing a tractor and implements.

Where a lot of people have risk exposure is when they use their tractor to help out a neighbor. Many policies which cover equipment damage do NOT cover liability exposure (especially when used off your property) and even if you have an umbrella liability policy (I do and it is a critical part of your insurance), it only works if you have an underlying policy providing base liability coverage for that item/incident.

Whether or not replacement value is a good bet for you depends upon your risk appetite and the replacement value policy rider cost. I never buy extended warranty plans because I would rather "self-insure" for those events and financially that isn't a real risk to me between ability to pay and ability to do a lot of repair work myself. I look at replacement versus market value the same way, I am willing to take the risk on paying the difference if a loss occurs and if you go for replacement value be sure to read and understand the total contract.

The only time I purchased an extended warranty, which is a form of insurance, was for a new car I purchased shortly before starting my PhD program. At that point in life, I didn't want a large unexpected expense or the hassle of worrying about it but since then the cost of an extended warranty is just more assets better put in long term investments. But when you have investments, you want sufficient liability coverage to protect yourself thus the caution about not ignoring liability exposure for your tractor and its operation.

Rodger
 
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Biker1mike

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B6200, Kubota 2030 Front Blade, King Cutter 60" finishing deck
Jan 11, 2022
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Isn't current market value mean the market value of the USED tractor and accessories?
 

fried1765

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Kubota L48 TLB, Ford 1920 FEL, Ford 8N, SCAG Liberty Z, Gravely Pro.
Nov 14, 2019
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Isn't current market value mean the market value of the USED tractor and accessories?
Yes,..... I believe it is.
"Replacement value" is loss payment in an amount sufficient to buy you an equal or similar, NEW tractor!
 

NCL4701

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L4701, WC68 chipper, grapple, BB1572 box scrape, Howes 500, 16kW IMD gen
Apr 27, 2020
1,448
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Central Piedmont, NC
Isn't current market value mean the market value of the USED tractor and accessories?
Yes. It’s what could it have been sold for (improvements, refurbishments, inrepaired damage: as is) immediately prior to the loss in a sale involving a seller who wasn’t obligated to sell and a buyer who wasn’t obligated to buy (a typical post it on the internet/in the classifieds type sale). That’s how it’s defined in NC and although the precise verbiage may vary a bit, that’s pretty close to universal.
 

Impala

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B2601
Jan 16, 2021
76
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WI
With the economy the way it is, used tractor prices are very high in most areas. This will help your value if you were to suffer a total loss. You don't have to take the 1st number the insurance company gives you.
 

D2Cat

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The ins. company may locate a similar year/hour/condition machine for you. You can accept it or reject it and find your own. You may also purchase the damaged machine at the same price the ins. co. can salvage it for.
 

mikester

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M59 TLB
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I'd suggest you specify a dollar figure for how much you want vs letting the insurance rip you off if you need to make a claim and you are over a barrel and the adjuster has their christmas bonus in mind and they want a gold star by their names on the "how many people did we screw this month" board.

Adjusters have a way of determining "replacement value" where you can't replace anything for what they offer you.
 

fried1765

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Equipment
Kubota L48 TLB, Ford 1920 FEL, Ford 8N, SCAG Liberty Z, Gravely Pro.
Nov 14, 2019
1,443
1,045
113
Eastham, Ma
I'd suggest you specify a dollar figure for how much you want vs letting the insurance rip you off if you need to make a claim and you are over a barrel and the adjuster has their christmas bonus in mind and they want a gold star by their names on the "how many people did we screw this month" board.

Adjusters have a way of determining "replacement value" where you can't replace anything for what they offer you.
Adjusters normally will have no input for "replacement value".
As the term states,....,, "replacement value" is the cost YOU will pay to buy a NEW "replacement" tractor , or..... whatever.
I speak from experience.

Had a major house/garage fire.
"replacement value" coverage provided me with new everything!
As an example: had an Onan generator that I bought used for $800.
"replacement value" bought me a new Onan generator......way more than $800.
LOTS of other stuff $$$$$ too!

USAA is a good insurance company, but with any insurance company, you may need to stand your ground on some issues.
 

mikester

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M59 TLB
Oct 21, 2017
1,743
663
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Canada
www.divergentstuff.ca
Adjusters normally will have no input for "replacement value".
As the term states,....,, "replacement value" is the cost YOU will pay to buy a NEW "replacement" tractor , or..... whatever.
I speak from experience.

Had a major house/garage fire.
"replacement value" coverage provided me with new everything!
As an example: had an Onan generator that I bought used for $800.
"replacement value" bought me a new Onan generator......way more than $800.
LOTS of other stuff $$$$$ too!

USAA is a good insurance company, but with any insurance company, you may need to stand your ground on some issues.
In my experience insurers consistently tend to err on the side of profitability.
 
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DustyRusty

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BX23S
Nov 8, 2015
1,969
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North East
I have/had replacement value insurance on my home, but in June 2022, the insurance company changed the rules in CT. Now they deduct for depreciation, etc. This even caught the insurance agent off guard, because the company didn't advise them of the change. Today, more than ever, you have to read your insurance policy completely if you are to understand what you are getting for your premium dollars. Years ago when I was an insurance adjuster for automobile physical damage, we used to joke that in paragraph 1, 2, & 3 they gave you the coverage, and in paragraphs 4,5, & 6 they took it away, and in 7, 8, & 9 they say that you never had any coverage at all. That was about 50+ years ago, and nothing has changed.
 
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Daferris

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LX2610
Nov 23, 2021
154
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Mid-Michigan
Insurance guy here...
ACV = Market value I.E what you could buy the tractor for from a private party.
Stated Value = See ACV above this only pays ACV up to the "stated amount".
Agreed value = This is where you have an appraisal for the value and the company and you "agree" on the value that would be paid in the event of a TOTAL LOSS before hand. Partial losses are usually done as ACV however some policies will pay the total amount and take possession of the insured item even with a partial loss.
Replacement cost = Replaces the damaged item with a new one of like kind and quality. Most often it 1st pays the claim as ACV then once the item is replaced (you generally have 180 days to do that it will pay the remaining amount as that's how they know what the true replacement cost is). Again MOST policies have a cap of 400% of what you paid new for the item.
Hope that helps everyone.

Another thing to look for in a Homeowners policy is if it says the tractor is covered when used "Solely" for the repair upkeep of the dwelling. SOLELY is the key word here and it is NOT what you want to see as once you take the tractor off your property it's no longer covered ANYMORE.
 

DustyRusty

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BX23S
Nov 8, 2015
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Insurance guy here...
.........................
Another thing to look for in a Homeowners policy is if it says the tractor is covered when used "Solely" for the repair upkeep of the dwelling. SOLELY is the key word here and it is NOT what you want to see as once you take the tractor off your property it's no longer covered ANYMORE.
Hopefully, you will be able to answer this question. I own 2 adjoining properties, one being the home that I occupy, and the other is a property that I bought from the owner giving him a "life use" of the property as payment. I am responsible for maintaining the outside of that property. If I am using my tractor on that property, is it considered part of my maintaining my property? Both the "rental" property and my home are on one Homeowners policy.
 

Daferris

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LX2610
Nov 23, 2021
154
131
43
Mid-Michigan
Hopefully, you will be able to answer this question. I own 2 adjoining properties, one being the home that I occupy, and the other is a property that I bought from the owner giving him a "life use" of the property as payment. I am responsible for maintaining the outside of that property. If I am using my tractor on that property, is it considered part of my maintaining my property? Both the "rental" property and my home are on one Homeowners policy.
Yes because they are on the same policy and that they physically are adjoining properties. Yes you would have coverage even under the solely definition.
 
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