Actual Cash Value vs. State Amount

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

President

 

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