I met with a new insurance agent yesterday to get a quote on insuring my service truck and contents. For years I have had $50,000.00 replacement coverage on the truck and a $50,000.00 Inland Marine policy on the tools ect. I've always known that the contents were not fully covered but this gentleman told me something I have never heard in 25 years of business. If I have $50,000.00 coverage and have some tools stolen, the insurance company will send out an adjuster to determine the value of all the tools in the truck. If they were to determine the replacement value at say $100,000.00, that would mean I was insured at 50% of value, so they would only pay 50% of the value of the tools stolen. Is this common? If I have $50,000.00 coverage and have tools stolen shouldn't they cover me up to that value? I look at it as another way for them to get more money out of their customers and another way to keep from giving their customers proper care.
I have been told pretty much the same regarding what is known as "underinsurance". They can do the same on a claim on your equipment policy if you have a claim. As you said, they will appraise the items covered and cover you in proportion to the claim. Not all policies do this, and if yours does, I would suggest shopping around a bit for a better company. It is not the agent, just the company he is representing. Funny thing is I was treated the worst by what I thought was the best policy with the "best" company the broker put me with. I changed brokers, got a cheaper policy in line with the current economy, and my service actually got better. On the service truck, I had to provide a list, with the value of each item. If it was not on the list, it was not covered, and if it was on the list, it was worth the stated value OR the replacement cost, whichever was lower. They also wanted the age of the tool, so it could be "depreciated". How do you depreciate wrenches that are worth as much when 20 years old as they were when new?
I've been seeing this crap for about two years now. It is called a co-insurance clause in your contract. It comes about because people are trying to save money on their policy and in order to do that the agents and the companies are dropping this clause in there to reduce risk and the amount of pay outs. You should ask your agent if there are companies that offer policies based on the agreed value of the property. It might cost more but if there is a loss you know what you will get. The co-insurance clause is showing up all over the business insurance world. Adjusters are not appraisers and they make money by saving the insurance company money. Don't ever assume they know what they are talking about as far as property and values. Depreciating a tool would depend on the tool and the factors of wear that occur. The key to depreciation in most states is that it has to be measurable. You can measure the tread depth on a tire against a new tire tread and make a percentage adjustment of the value of the tire. So what on a wrench is measurable wear? What generally happens is that an adjuster will go to a pawn shop looking for the kinds of tools you have listed and use the asking prices there as the value of your tools. Never mind that much if not most of the pawn shop items were stolen in the first place. What I have used for an argument in the past is that the tool has a lifetime warranty and that if I took the tool to the dealer broken, they would replace it with a new one. Power tools, welders and air compressors will always require a negotiation if there is a loss. Probably the genesis of the tool issue comes from the term "mysterious disappearance." I've seen people claim all their tools were stolen from a garage or truck and when the adjuster gets to the scene they find doors with no locks or sometimes even no latches. With no evidence of a burglary, what is the adjuster supposed to think? I've never loaded my tools up in a truck without making a list. My last service truck I even video taped loading the tools in. I would at least recommend a photo of each compartment and a listing of tools in each. I've kept a spread sheet of my revenue generators with make, model, description and original price. It's a pain in the butt but if I have a loss I'm going to deal with the adjuster square up.
As a former adjuster I will tell you that an adjuster is supposed to appraise your loss and recommend payment. By law they are not supposed to save the company money but are supposed to be sure that your claim is in fact valid and by the terms of the policy make sure you are paid the correct amount. Now most adjusters figure their loyalty is to the company, you can figure that out. If you are shopping around for the cheapest coverage you are setting yourself up for failure. You really need to get online, check out which companies have the best reputation in your state and go with them. Sure it's going to cost a little more but when you have a loss it will be settled in fair manner. Good example is the guy who insured for cheap. Had a house fire and the FD cut holes in his roof to gain access to put out the fire. Insurance refused to cover the roof because the policy stated clearly that they would only cover damage directly cause by the fire and the roof had no fire damage. The 2nd guy had good insurance. His little back yard work shop burned. I think the building could have been saved. His company replaced the building, all the contents with only his word as to what tools were in it and paid for cleanup minus his 500 buck deductible. Another bad case was the F4 twister that hit Wadena MN a couple of years ago. Took out the school building. The insurance tried to say "this 20 foot section of wall is still good and that 20 foo sections is good......trouble was none of them were connected to anything. They were very near to legal action when the insurance company gave in and declared it a total loss. The school had the contractor refusing to do anything if it included any parts of the old building, independent adjusters that called it a total and a building inspector from the state saying the same thing. You get what you pay for with insurance. As far as a service truck is concerned you should have that and it's contents insured at 100% with maybe a bit higher PIP coverage. Depending on the state the amounts any commercial vehicle is liable for can far exceed the amounts for a personally own car. In MN there is a limit of liability for a personal vehicle but no limit for a commercial vehicle. If it's used in a business it's considered commercial. Be careful here because business insurance may cover that and you don't need to pay for something thats covered under another policy. Remember, you are not buying a policy because you have to. You are buying it to protect yourself. Rick
Well said OldTanker