When it comes to insuring your hunting lodge you want to make sure you understand the difference between actual cash value vs. replacement cost. This could be an important factor should you have a claim.
Replacement Cost is the amount it would take to replace or rebuild your hunting lodge or repair damages with materials of similar kind and quality, without deducting for depreciation. Depreciation is the decrease in your hunting lodge or property value since the time it was built or purchased because of age or wear and tear. Many insurers require the property to be insured for at least 80% of the replacement cost. If the insured fails to insure for at least that, a penalty is applied to partial losses. For example, if it would cost $50,000 to replace your hunting lodge and it is insured for $40,000 (80%), and a fire causes $25,000 worth of damage, then your insurance company will pay the full $25,000.
On the other hand, if your $50,000 lodge is insured for $30,000 and you suffer a $25,000 loss, your company would pay for only part of the loss and you would have to pay for the balance yourself. It may therefore be advisable to insure your property at a minimum of 80% of its replacement cost. This is important to talk to your agent to see what is required. You may wish to insure at 100% of replacement cost so you will have sufficient coverage in the event of total loss.
Actual Cash Value is the amount it would take to repair or replace damage to your hunting lodge after depreciation. For example, if your roof has a 20 year warranty and is 17 years old, there would be depreciation for the age and condition of the roof.
Most standard insurance policies cover the contents of your property (i.e. business personal property) on an actual cash value basis. Many insurers offer an option for you to insure your belongings at a replacement cost. The premium will be slightly higher for this coverage; however, you may want to consider the option.
Whether your hunting lodge is insured for replacement value or actual cash value, it is important to keep track of its value. For instance, the addition of a room, improvements, and yearly inflation all increase the replacement cost of your home, while the actual cash value of the property may decrease over time.
Check with your agent at least once a year to make sure your policy provides adequate coverage.