What is the common valuation method for Contractors Equipment Floaters?

The common valuation method for Contractors Equipment Floaters is based on Actual Cash Value (ACV). This method reflects the current market value of the equipment at the time of a loss, which takes into account depreciation. Insurance policies using ACV are designed to provide coverage that recognizes the wear and tear, obsolescence, and other factors that can affect the value of the equipment over time.

This approach is practical for contractors who may not require replacement value coverage for their equipment, especially since they often have diverse and varying types of machinery that could be difficult to replace exactly or find like-for-like.

In contrast, Replacement Cost would provide coverage to repair or replace the equipment without deducting for depreciation, which is often not the standard for Contractors Equipment Floaters. Agreed Value involves the insured and insurer settling on a value prior to an insurance event and is typically used for unique or collectible items rather than typical contractor equipment. Cost plus allowances is not a standard valuation method in insurance and does not accurately reflect how contractors equipment is typically valued.

Thus, the use of Actual Cash Value aligns with industry practices and the nature of equipment used in contracting work.