Cabins, from Camping Cabins to larger Park Models, are a key part of revenue generation for many KOA Campgrounds. It is essential that KOA owners know, and fully understand, what is covered by their insurance and what is not, especially if one or more of your cabins experience damage. What many KOA owners don’t know is that insurance companies have the right to determine not only the amount of the loss, but also whether you are carrying enough insurance. These rights are specifically written into every property insurance policy. If you do not have enough insurance, you may not receive a large enough check to fully repair the structural damage or fully replace damaged appliances, fixtures, and furniture.
When selecting the coverage limits for your cabins, one of your main priorities should be to determine the type of valuation. The most common option for valuing a cabin is “replacement cost,” which is the cost to have a qualified contractor replace it with a similar sized structure of “like kind and quality.” In other words, “enough” insurance is the amount it would cost to hire a contractor to replace the entire cabin, just as it stands today, with entirely new material. Many campgrounds purchase prefabricated cabins or cabin kits. If that is the case, “replacement cost” should be the cost to purchase the kit, have it delivered, and set up. If you do not have enough insurance, the insurance company is allowed to only make a partial claim payment. Even if you only have a partial loss, a $10,000 fire for instance, the insurance company may still only make a partial claim payment. “Enough” insurance is determined at the time of the loss, so if you have not adjusted the value of your cabins in a while, you may be at risk.
The best way to determine the replacement value is to use your cabins’ appraisals to determine the proper limit, or get advice from a local contractor familiar with your cabins. You can also get pricing from the cabin manufacturer of your choice and inquire into delivery costs. Most importantly, you should work with a trusted insurance agent who will regularly discuss property limits with you and review your current valuations.
In addition to understanding the replacement value of your cabins, Merriam Insurance recommends that you fully understand the type of deductible you have. Most standard Commercial General Liability policies can be structured in one of two ways; a “per occurrence” deductible or a “per building” deductible, and the impact to your bottom line can be significant depending on how your policy is written.
If more than one cabin becomes damaged you are better off having a “per occurrence” deductible, assuming the damages occurred from the same event. Otherwise, you could be on the hook for many multiplies of your stated deductible, depending on the number of cabins that are damaged.
The Merriam Insurance Agency recommends that you review how your insurance policy is written and fully understand the valuation of your cabins and any applicable deductibles. Contact us today to learn more or to speak with one of our KOA insurance experts.
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