Truck Insurance, are you paying too much?

by Guest Posting on 2011-04-12

What do you think the insurance company will pay out if your truck is written off, Market value? What is market value? Is that the amount you are insured for? Could it cover the cost of replacing your truck? Or is it what you could have sold your truck for, just prior to its mishap? It is nearly always the latter; what the general retail market would pay for your truck, if it was for sale.

What if your truck is entirely specialised to your task and cost an absolute fortune to build?

Regardless of what it cost you; it’s only worth what the general market might pay for it. How can this be fair? Well, that’s the case with claims; the insurer gets one or more pre accident valuations, this is used to decide what the asset reasonably would have sold for, on the retail market, immediately prior to the claim.

This value may not take into account the value to your business of; any engineering and/or equipment built on, or added to your cab chassis. In some cases these improvements may even make the asset worth less, on the retail market. It is entirely up to the expert valuers, what they might think your asset was worth pre accident. Do you know who your insurance company is using to value your assets? Are they experienced enough to put a value on your gear?

You might think your linehaul truck is worth $200k and insure it for that. If a valuer gives the insurer a PAV (preaccident valuation) of less, you are over insured; the insurer will only pay market value. The difference in insurance premiums between a value of $200k and $100k on a linehaul vehicle could be several thousand dollars per year. It would pay to get your own reputable value estimation done prior to each insurance renewal, at least you then have something to compare to their PAV, if required.

What if I have a custom built truck which is no good to anyone else?
In some cases it may be worthwhile separating the coverage; insure the cab chassis for market value and then insure the plant and/or equipment on the back using a depreciation formula. This type of cover could be negotiated on a case by case basis with your insurer or broker. This may save your business in the event of a claim.

I know of one recent case where a client had a 2004 6x2 truck with a specialised body on the back, the bodywork cost around $100k, over and above the cab chassis price. The body is so specialised that it actually makes the truck as a whole very difficult to sell, essentially you need to devalue the truck to the same or below cab chassis value to sell it. So; if the truck was written off and a PAV was done for the insurer, they would only pay out the cab chassis value, because this is all the market said the truck is worth. Had the owner insured the cab chassis separately, they may have retained the opportunity to realise some value from the bodywork.

This may still not help them replace the asset, but at least they would realise a truer value than what the market might have said. Unfortunately as a whole our industry is often included with cars and treated the same, or similar. Trucks are not like cars, one size does not fit all. In these unprecedented times, any opportunity to lower expenditure must be explored. I believe now is a good time to have a detailed look at your vehicle insurance, you might find you can save a significant amount on your premiums.

You might also find there is an opportunity to better cover your business, with regard to any specialist gear you might have in your fleet.

If you are unsure where to begin, or need any assistance with heavy commercial vehicle values, give Craig a call, or visit www.easytrucks.co.nz we are here to provide solutions and to help the transport industry grow.


Craig Silby
CKLS Trading Ltd trading as:
www.easytrucks.co.nz
craig@easytrucks.co.nz
Phone: 09 950 4815
Mobile: 021 740 565?