How does the Insurance Company reimburse for losses for all the different types of Farm Coverage?
At Ferranti-Graybeal Insurance Company, one of our missions is to make sure our clients and prospects are educated on the type of insurance they have/may need. Farm Insurance may confusing to some, as they are six different types of coverage, additional coverage, payouts for losses, etc. In this blog, we are going to discuss the different ways insurance companies will reimburse the insured for their loss, depending on the type of coverage they purchased.
Coverage A (Dwelling) and Coverage B (Other Private Structures)- How is a loss reimbursed/covered?
Loss is reimbursed by the Replacement Cost - The cost to replace a damaged/destroyed item of property, without deducting for any depreciation. This is subject to an 80% coinsurance clause when it pertains to partial losses. A coinsurance clause is: the insurance company will pay the FULL amount on a PARTIAL loss up to the limit of insurance carried, if the insured carries the percentage required of coinsurance. If the insurance company requires an 80% coinsurance be carried, that means that the insured is carrying insurance on the value of 80% of the property. If the required percentage is maintained, then, in the event of a partial loss, the insurance company will reimburse the loss completely. If there is a total loss, the insurance company will cover up to the percentage carried (if the stated required % is carried) and the insured is responsible for the remainder of the expense to replace. The insurance company will pay the least amount of:
1. Cost to replace the damaged part of the structure with an equal amount of construction for use on the same property.
2. Up to the applicable limit of insurance.
3. Actual amount spent to repair or replace the structure.
Coverage C (Household Personal Property)- How is this loss reimbursed?
Coverage C is replaced on the premise of Actual Cash Value. Actual cash value is the value of the property MINUS the depreciation cost. That equation equals how much the insurance company will reimburse the insured.
Coverage E (Scheduled Property) and Coverage F (Unscheduled Property) - How are these losses reimbursed?
The amount that it costs to repair or replace using the Actual Cash Value method. However, the insured is required to carry and maintain insurance that's at least 80% of the cash value on unscheduled personal property. If the insured carries less than the required amount, the insurance company imposes a penalty at the time of loss, by not paying for more than what is covered, divided by required amount, times the loss.
Coverage G (Other Farm Structures)- How is Coverage G reimbursed after a loss?
The insured (at time of implementing policy with insurance company) may choose to select either Actual Cash Value or Replacement Cost as their method of reimbursement. If they've chosen replacement cost, they must carry coinsurance. In both cases, the amount will not exceed the actual amount necessary to repair or replace the damage, up to the applicable limit of insurance.
At Ferranti- Graybeal, we are happy to help answer any questions you may have! Our experts in Farm Insurance are waiting to assist.
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