April 15, 2012
We commonly encounter clients who wish to “self-insure” their low value equipment, including tractors and trailers, for physical damage. When asked why clients often respond that they assume it will save them money. While it may be correct that rejecting physical damage coverage for older equipment will create a small savings in terms of monthly premiums, it is also important to consider the costly payout you may face in the event of an accident.
Let’s take an example of a tractor that is not insured for physical damage. In the event of a disabling loss, i.e. one where the tractor cannot be driven away from or the trailer cannot just be hooked on to another rig, in addition to the costs to repair or replace the tractor, an insured should expect to pay costs and associated with the following:
1.) Towing the equipment to the nearest repair facility
2.) Storage of the towed equipment until it is determined whether you will repair or simply replace the damaged equipment
3.) Extraction of pollutants that leaked from the uninsured equipment at the scene of the accident.
4.) Downtime or equipment rental while your tractor or trailer is being repaired or you are looking for its replacement
5.) Removal of debris removal and to clean up the scene of the accident.
If you take a tractor that is valued at $7,500 and apply a four cent physical damage rate to it (note: physical damage rates do tend to be higher for older equipment) you could expect to pay an annual premium of $300 for that particular vehicle. In the event of one loss, this premium will easily recouped just in the cost to tow (let alone hook up for towing or store) the tractor.
While insuring lower valued equipment might not be the right decision for every company, it can be very much in the best interest of a company who faces cash reserve challenges or does not have spare equipment on hand to use when their primary vehicle is out of service.
Would you like to weigh the costs of insuring your low value equipment? Call our office today at (800) 596-TRUCK (8782) to request your free quote. All of us at the Navigator Truck Insurance Agency work hard at being accessible, helpful and result-oriented.
September 15, 2011
Transport Topics recently published an article which confirmed what many of us in the industry have been suspecting for while now: used equipment values are on the rise (Used Trucks Become Scarce; Prices and Mileage Increase, Transport Topics Online). According to one quoted source, while motor carriers are continuing to seek low mileage vehicles, the availability of equipment has them purchasing equipment with 600,000 to 700,000 miles at prices that are up 15% from just a year ago. Another industry insider indicated that equipment prices are averaging $3,000 – $5,000 higher than last year.
The impact of increased values is multifaceted. On one hand, it’s great for individuals looking to sell their low mileage equipment, but it poses a purchasing challenge for individuals seeking to purchase the same. It also impacts individuals who have no plans to buy or sell equipment. Increased values can have an unfortunate impact on an individual whose equipment is insured on a stated value or scheduled vehicle physical damage policy.
Take for example a recent claim we encountered. Our client’s equipment was insured against physical damage losses on a stated value policy. In essence, the insurance company would pay either the stated value of the equipment or the Actual Cash Value at the time of loss, whichever is less. While our client’s stated equipment values where adequate a year ago, in today’s market they were significantly lower than the equipment’s current Actual Cash Value, the amount he would have to pay to purchasing a replacement piece of equipment with similar year, make and mileage. You can imagine his disappointment and frustration when he found himself having to pay (in addition to his deductible) an extra $5,000 to purchase equipment similar to what he had before the loss.
How can you prevent this from happening to you? Be sure to regularly check the value of your equipment in the marketplace. To learn more about valuing your equipment and the potential impact on premium, see our President’s Blog article addressing this topic from June, 2011 here. Websites such as www.truckpaper.com allow you to search by year, make, model, mileage and features to obtain a good baseline of current prices. If you find your current values are too low, call your insurance agent to have values increased. Still have questions about determining the actual cash value (ACV) of equipment for insurance? Feel free to call our office today at (800) 596-TRUCK (8782). At the Navigator Truck Insurance Agency we work hard to be accessible, helpful and result oriented.
January 1, 2010
Over the course of the last year I have seen a significant improvement in the physical damage coverages available to small companies with fewer than five trucks and owner operators who lease their equipment on to a motor carrier. Often referred to as “Physical Damage Enhancements,” many different insurance companies are offering unique coverages that clients can choose to add to their existing physical damage policies for a nominal premium increase. Some of the most popular coverage enhancements include:
Towing or Roadside Repair Allowance for Mechanical Breakdown: This is a particularly valuable enhancement because it doesn’t require that your truck be in an accident. It provides coverage for when your truck experiences a mechanical breakdown. The coverage provides an allowance which can be used toward the expense to tow your tractor to a repair facility or for a roadside repair in the event of a mechanical breakdown.
Emergency Family Travel Allowance: This endorsement will pay a specified amount toward the travel expenses of a driver’s qualifying family members so that they may travel to the location of an accident in the event that the accident resulted in the driver’s hospitalization or death.
Diminishing Deductibles: This endorsement will reduce the physical damage deductible by a specified amount for each loss free year. Most companies will waive the deductible entirely once you have been loss free for 4 or more consecutive years (starting from the year this coverage is purchased.)
Downtime or Rental Reimbursement: This endorsement will pay to supplement the loss of income or the additional costs incurred to rent a replacement tractor due to covered loss that left your tractor in the shop for repairs.
Personal Contents: This is a nice enhancement because your personal belongings in the truck are not covered by a typical homeowners or renters policy. This endorsement provides an allowance to reimburse you in the event that personal contents in your truck are stolen or destroyed due to a covered loss.
Gap Coverage: Provides coverage so that in the event you owe more on your tractor or trailer than it is worth at the time of loss your bank note will be paid off. Provides coverage for the gap between what you owe on your equipment and what it is worth at the time of a total loss. With equipment values depreciating so quickly right now, this is a valuable coverage.
Electronic Equipment: Covers permanently installed electronic equipment such as computer systems, fax machines, video cameras, satellite tracking systems, two-way radios and so forth in the event of a covered loss.
Miscellaneous Equipment Coverage: Provides coverage in the event of a covered loss for items used in the daily course of work such as tarps, chains and binders, but that are not included in the value of the trailer.
Deductibles may apply and limits and coverage terms will vary by insurance company. To learn more or to request a quote, call us today at (800) 596-TRUCK (8782.) All of us at the Navigator Truck Insurance Agency work hard at being accessible, helpful and result oriented.
Until next month,
Jeffery A. Moss
November 10, 2009
With increased fuel costs and changes in idling regulations, many truckers have opted to install auxiliary power units or generators (commonly referred to as APUs) in to their tractors. The intent of APUs is to reduce costs and, in some cases, comply with environmental regulations. However, as with any acquisition of new equipment, there is a need to make certain it is included for insurance coverage in the event that it is damaged by a covered loss such as collision, fire or theft.
There are two ways to provide physical damage coverage for an APU. The option you choose will be determined, in part, by answering the following questions:
Was the APU installed at the factory and cannot be removed from the tractor?
If the answer to this question is “yes,” then you may want to insure the APU on the tractor’s physical damage policy. To do so you would include the value of the APU in the tractor’s value. In the event of a covered total loss, you would be paid the value of the tractor (including the APU) less your deductible. In the event of a covered partial loss, you would receive the amount to restore the tractor (including the APU) back to pre-loss condition, less your deductible.
Was the APU installed after the tractor was purchased or can it be removed from the tractor?
If the answer to this question is “yes,” then you may wish to insure your APU on an inland marine policy. An inland marine policy provides physical damage coverage for the APU (as well as any other equipment you chose to schedule on the policy) for those perils outlined in the policy. Common perils include vehicle accidents, theft, fire and vandalism. The inland marine policy provides coverage for the APU wherever it is at the time of loss. A benefit of this type of policy is that if the tractor is considered a total loss by the physical damage policy’s standards, but the APU is not damaged or sustains only minor damage, you can take the APU out and install it into your next tractor. Also, the deductibles for inland marine policies tend to be lower than those for a physical damage policy.
At the Navigator Truck Insurance Agency we work hard at being helpful, accessible and result oriented. Is your APU properly insured? Give us a call today at (800) 596-TRUCK (8782) and we will be happy to review your options with you.
Until next month,
Jeffery A. Moss
October 12, 2009
Occasionally in speaking with a prospective client I am told that they do not carry physical damage on their equipment. When I ask “Why?” the answer I usually get is that the equipment is paid for, so it saves the company money not to insure it.
I disagree and let me tell you why. When you remove the physical damage coverage for a piece of equipment, you are also removing the insurance against the hidden costs of an accident. True you may pay less in your annual insurance premiums, but in the event of an accident, the financial implications are much bigger than you might expect.
Here is an example of how not carrying physical damage insurance can negatively impact the company’s bottom line.
1.) Towing Bills: Most physical damage policies include a provision to pay for all or part of the towing expense to move the damaged equipment to the nearest repair facility or salvage yard in the event of an accident. Towing is a huge expense, averaging between $5,000 and $10,000. I have even seen tow bills as high as $35,000!
2.) Debris Removal Expenses: Most physical damage policies include a provision to pay up to a specified amount to clean up debris due to a covered loss. Again debris removal can be a costly expense; one that is difficult to quantify before the loss occurs.
3.) Replacing Equipment: If the uninsured tractor or trailer is totaled in a loss there is nothing to help set you up with your replacement piece of equipment. If your equipment is worth $5,000 and you have a $1,000 deductible, in the event of a total loss you can still expect to get $4,000 back to put toward the down payment on your next tractor or trailer. A $5,000 limit will have an estimated premium of about $350 per year.
4.) Temporary Replacements: If you choose to purchase rental reimbursement or downtime coverage with your physical damage policy (and some policies include this coverage automatically) you are providing yourself a little extra to help offset the costs to rent a replacement tractor while yours is in the shop being repaired. If a suitable replacement is not available the downtime can provide you with a little supplemental income while you are laid up.
As you can see Physical Damage coverage is much broader than just insuring the vehicle itself. By purchasing Physical Damage coverage you are insuring yourself against the additional hidden costs associated with an accident.
Are you ready to add physical damage insurance to your policy? Do you have questions about your existing physical damage policy or wish to get a quote? Call us today at (800) 596-TRUCK (8782.) All of us at the Navigator Truck Insurance Agency work hard at being accessible, helpful and result oriented.
Until next month,
Jeffery A. Moss, ARM
September 14, 2009
Insurance policies can be a challenge to read, especially if you aren’t familiar with all of the industry jargon or didn’t get a thorough run down of coverages before purchasing your policy. At the Navigator Truck Insurance Agency we work hard to make certain our clients understand their policies well before the paperwork is signed. However, one area that we regularly find ourselves clarifying during the process is the basis on which a physical damage policy was written: Actual Cash Value or Stated Amount.
Actual Cash Value and Stated Amount are terms referring to the method used to value a piece of equipment and are quite different from one another. This month I thought I’d take a moment to explain the differences between these two terms and why the valuation basis matters in the event of a claim:
Actual Cash Value: This is a method of valuing equipment that some insurance companies offer to their fleet clients (those operating 10 or more power units); we even represent one company who offers it to their non-fleet clients. While at policy inception you will be required to provide a current equipment schedule that includes the estimated value of your equipment, this value is not used to adjust a claim. Instead, in the event your tractor or trailer is damaged in a covered loss the physical damage claims adjustor will go to the marketplace and determine what the equipment was worth as of the date of the accident. In the event of a total loss you will be paid this amount less the applicable deductible. The benefit of this sort of policy is that there is no limitation set on the value of equipment. It is worth whatever it is worth; no more, no less and co-insurance never applies.
Stated Amount: This method puts the responsibility to report the value of a piece of equipment on the owner. You specify if your truck is worth $100,000 or $10,000 and the underwriter rates your physical damage policy’s premium accordingly. All the responsibility falls to you. In the event that your tractor or trailer is damaged in a covered loss the physical damage claims adjustor will go out to the marketplace and determine the value of your tractor or trailer as of the date of loss. This is where things get tricky. If the insurance company finds that you significantly under valued your tractor or trailer a Co-Insurance Clause may apply (see my November 2008 and January 2009 posts for more information regarding Co-Insurance and Constructive Total Losses), which might mean you will be paid significantly less than what you expected to get for your vehicle in the event of a total loss. As a general rule a non-fleet (operating fewer than 10 power units) or bobtail client will see their policy written on a Stated Amount basis.
Curious if your policy is rated on an Actual Cash Value or Stated Amount basis? Could you use help understanding your truck policy coverage? Give us a call today at (800) 596-TRUCK (8782.) All of us at the Navigator Truck Insurance Agency work hard at being accessible, helpful and result oriented.
Until next month,
Jeffery A. Moss, ARM
July 17, 2009
It is bound to happen. Your tractor is in the shop so you have to rent a truck to complete this week’s runs or you get a great opportunity to haul a load of ice cream, but first need to borrow a buddy’s reefer unit. Many times the arrangements are made at the last minute while trying to secure a load that needs to go out right now! In the rush we can forget to think through the mechanics of it all, specifically whose insurance is going to respond if there were an instance when the loaned equipment was involved in an accident.I often hear from clients (too frequently after the fact) that they assumed the other party’s insurance would pay, but that is not always the case. Insurance doesn’t necessarily follow a piece of equipment no matter who is operating or pulling it. And, even if it were to, it is important to consider the ramifications to a business relationship or friendship if damage was to occur. Too often it happens that each party wants the other’s insurance to pay.
As a rule we encourage our clients to round out their truck policy by adding hired and non-owned auto liability insurance and hired physical damage so that they are prepared for these eventualities. Here is how it works:
Hired Auto Liability: This coverage extends the auto liability coverage to include power units you have rented or short term leased (usually defined as a less than 30-days.)
Non-Owned Auto Liability: This coverage extends the auto liability coverage to include non-owned vehicles being operated for the benefit of your company. Non-owned meaning that you have not hired it (rented or leased it). This often takes the form of an employee operating their own vehicle while running an errand for the business. For example: running to the bank, post office or office supply store
Hired Physical Damage: This coverage extends the physical damage coverage to include equipment you have rented, borrowed or short term leased (usually defined as less than 30-days.)
To learn more about these coverages or to request a quote, call us today at (800) 596-TRUCK (8782). All of us at the Navigator Truck Insurance Agency work hard at being accessible, helpful and result oriented.
Until next month,
Jeffery A. Moss
March 15, 2009
Life on the road is hard. . . long hours and days away from family and friends. It’s no wonder that many truck drivers these days try to duplicate some of the comforts of home in their truck. And it goes well beyond staples such as clothing and food. It is now common for a long haul trucker to carry his laptop, portable printer, television and DVD player in the tractor with him.
But what happens in the event that your tractor is stolen or involved in a serious loss that also damages such personal possessions? Can you make a claim on your truck insurance policy or do you have to chalk it up to a loss? The good news is that there are a number of ways to insure such possessions in the event of theft or damage.
Many insurance companies now offer endorsements to add Personal Contents coverage. Personal Contents coverage provides limits up to a specified amount (usually in the ballpark of $2,500) for a driver’s personal possessions. These endorsements will require the insured to pay a small deductible (such as $250) on any claims paid.
Another option is to purchase an Inland Marine policy. This policy can be purchased separately from the Physical Damage policy (which means you can buy it even if you choose not to carry Physical Damage on your truck.) The coverage will follow your property everywhere it goes and also requires a deductible to be paid per covered loss. Deductibles normally range somewhere between $250 and $1,000. Benefits of the Inland Marine policy include the ability to schedule the items you are insuring and being able to purchase higher limits than what are available on the Personal Contents endorsement available through a Physical Damage policy. Also, claims made on the Inland Marine policy do not show up on the Physical Damage loss history, which is nice in the event that you experience a theft of your personal contents, without having damage to the truck.
One final option that we often see overlooked is to endorse a coverage for your personal belongings in your truck to your Homeowners or Renters policy. That can work, too.
As with all policies, you will want to carefully consider the terms, conditions, exclusions and cost of these options before making a final decision. If we can help, give us a call at (800) 596-TRUCK (8782). We’d be happy to help you out any way we can. All of us at the Navigator Truck Insurance Agency work hard at being accessible, helpful and result oriented.
Until next month,
Jeffery A. Moss, ARM
January 28, 2009
I have recently been encountering more instances where prospective clients have been burned by a Co-Insurance clause on their Physical Damage or Cargo policies. Co-Insurance can be a confusing thing to navigate and requires special attention to policy limits and the actual cash values of equipment and cargo than policies without Co-Insurance.
What is Co-Insurance?
It should first be explained exactly what Co-Insurance is. Co-Insurance is a device used by insurance companies to encourage policyholders to insure their property (i.e. tractor, trailer, cargo, building or contents) for amounts which are close or equal to the actual cash value of the property. In essence you are penalized if you do not carry “adequate limits.” Normally, an “adequate limit” is defined by the insurance company as somewhere between 80% and 100% of the actual cash value of the property (depending upon the policy verbiage.) If you do not carry the “adequate limit,” the insurance carrier will reduce your claim settlement in the event of a partial loss. Co-insurance does not apply to total losses.
How does it work?
Let’s use an example where a Physical Damage policy has an 80% Co-Insurance requirement. The actual cash value of the tractor in question is $100,000. The insured has it listed as $75,000 on his policy. Under the Co-Insurance clause, he would have needed to schedule it for a minimum of $80,000 in order for the Co-Insurance clause not to apply.
The tractor is involved in a covered loss that causes damage, but doesn’t total the tractor, and now the claims adjustor is determining how much to pay the insured. In this case he would take the amount of insurance the insured DID carry ($75,000) and divide it by what he SHOULD have carried ($80,000.) This factor (.9375) is now applied to the amount to be paid to he insured. Let’s assume that the damage totaled $50,000. This means that the amount paid would be $50,000 x .9375 less the deductible. So in this case, instead of receiving $50,000 less the deductible, the insured will receive $46,875 less the deductible. And there’s the burn. The client ends up “self-insuring” an additional $3,125.
Do your Physical Damage or Cargo policies carry a Co-Insurance clause? Not sure where to look to find out? Give us a call at (800) 596-TRUCK (8782.) Often times we can tell you without even looking at the policy verbiage if the insurance carrier has a Co-Insurance clause. In those cases where we can’t, a quick review of your policy will tell us for certain. Don’t get caught off guard.
Until next month,
Jeffery A. Moss, ARM
November 14, 2008
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A while back we had a client who experienced something that we in the industry call a “Constructive Total Loss.” For him, it was a very painful experience, one that I think we can all learn from.
What is a “Constructive Total Loss?” A CTL is a loss where the item insured is not totally destroyed, but is so severely damaged that the insurance company considers it uneconomical to repair. A CTL in and of itself is not particularly painful, but if you happen to have undervalued your equipment, purchased a stated amount physical damage policy (which the majority of policies are) and been involved in an accident that damages your equipment at 50% or more of the amount stated on the policy, you may feel you got burned.
Here’s what happened to our client:
Tom purchased a “lead” and a “pup” flatbed trailer to be pulled as doubles. The “lead” was purchased for $40,000 and the “pup” for $45,000. Tom figured he could repair almost anything that could happen to these trailers if they were involved in an accident, so he decided to insure them on a stated amount policy for $15,000 each. His assumption was that this would reduce his physical damage premium and that in the event of a claim, if the insurance company paid him $15,000 for each of them, he would be able to use that money to repair any damage that might occur.
On a snowy, icy day Tom lost control and rolled his rig. The result was $12,000 in damage to the “lead” trailer (80% of the value he insured for) and $9,500 to the “pup” (63% of the value insured for.) Tom thought everything was going to be ok, until the Claims Adjuster called him and told him that he was going to “total-out” the two trailers and would be sending Tom a check for $30,000 and, per the policy conditions, the insurance company would be taking possession of the totaled vehicles. Tom quickly realized that while he had $30,000 in his pocket, he had nothing to repair and an additional $55,000 in outstanding loans for the equipment!
There are two important lessons that Tom learned. The first is that there is no savings in underinsuring your equipment. To have insured these trailers up to their full value would have likely cost less than and additional $1,500 a year (much less than the ultimate hit of $55,000.) Additionally, Gap Coverage (which I discussed in last month’s posting) is a coverage that can be vital to protecting yourself financially from unforeseen catastrophic losses.
What would happen in the event of a loss that did a significant amount of damage to your equipment? Would you be content with your settlement in the event of a CTL or is it time to make some revisions? Give us a call today and we can discuss with you the best methods to insure yourself so you don’t get burned by a Constructive Total Loss.
Until next month,
Jeffery A. Moss