I have worked in the insurance industry all my life. Not an agent, and my particular job did not directly involve insurance of equipment or autos. But with that said, I have never heard of replacement cost insurance on equipment or automobiles. To my knowledge those policies are almost always based on fair market value. Otherwise, the scenario would be just as you describe, the insured could be highly motivated to have 'something happen' to their insured equipment in order to upgrade to a brand new unit, at little or no cost to them. That goes against the whole concept of insurance which is simply to restore the insured to the same position he was in prior to the loss. No more, no less.
Insuring an item for replacement cost can skew the premium rates greatly. Imagine what your insurance premium for your 40 year old tractor that's worth maybe four or five thousand dollars would be if it was based on the cost of a new unit worth 10 times that much. The annual premium could easily be half the value of the unit!
The only place I have ever heard of replacement cost coverage is in regard to homeowners insurance on the structure and contents. There can be issues there too. As an example consider some of the fine old Victorian style houses that are located in so many small towns across our land, where fair market value doesn't come close to the cost of rebuilding that home.
Most homeowners policies will only pay replacement cost if the insured actually purchases a replacement item. If the insured does not replace the item then the loss will be settled at fair market(cash)value.
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Today's Featured Article - Field Modifications (Sins of the Farmer) - by Staff. Picture a new Chevrolet driving down the street without it's grill, right fender and trunk lid. Imagine a crude hole made in the hood to accommodate a new taller air cleaner, the fender wells cut away to make way for larger tires, and half of a sliding glass door used to replace the windshield. Top that off with an old set of '36 Ford headlight shells bolted to the hood. Pretty unlikely for a car... but for a tractor, this is pretty normal. It seems that more often than not they a
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