| Misunderstood Property Ins. Issues (Part 2) | |||
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Functional replacement cost on personal property Functional Personal Property Valuation (Other Than Stock) CP 04 39 The Functional Personal Property Valuation (Other Than Stock) CP 04 39 endorsement provides a means to value personal property to reflect use. This coverage is used when functional replacement cost is less than replacement cost. Coinsurance is not applicable. Here's an example. A printing company is currently using an antiquated printing press with an actual cash value of $50,000. If this press were destroyed, replacement with an identical press would be impossible. The closest equivalent type of property available is a two-color printer which would cost $l00,000. Using the Functional Personal Property endorsement and specifically scheduling the printing press, the insured could choose a limit of insurance of $l00,000 to have coverage for the cost of a newer printer. Here's another example. A company is currently using a computer purchased 5 years ago for $l0,000. If this computer were destroyed, the cost to replace this computer with one that performs the same functions would be $3,000 due to technological advancements. Using the Functional Personal Property form and specifically scheduling the computer the insured could choose a limit of $3,000 to have coverage for the cost of the newer computer. Commercial Lines Manual The following comes from the Commercial Lines Manual: "Functional Personal Property Valuation (Other Than Stock) 1. Description of Coverage. Functional Personal Property Valuation (Other Than Stock) provides coverage for specifically scheduled item(s) of personal property which can be replaced with similar property that performs the same function as currently used. a. Coinsurance. Not applicable b. Blanket Insurance. Not applicable c. Premium Determination. Determine the premium for each cause of loss by multiplying the 80% coinsurance personal rate by 1.25." |
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Not only are policy forms, clauses, rules and court decisions constantly changing, but forms vary from company to company and state to state. This material is intended as a general guideline and might not apply to a specific situation. The authors, LunchTimeCE, Inc., CEfreedom, and Insurance Skills Center, and any organization for whom this course is administered will have neither liability nor responsibility to any person or entity with respect to any loss or damage alleged to be caused directly or indirectly as a result of information contained in this course.
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