Risky Business
What is Financed Value Coverage
Hi Everyone,
I was originally going to use this topic as an article for Expedite Now, but when I saw Bobby Snyder's blog (see to left of this one) I thought it was the perfect segue into the subject here on EO instead.
Bobby with FYDA is spot on with his discussion of "Aging Equipment" and the decision to keep your current truck or upgrade to a newer one. We're seeing more and more Owner Operators "down" because their truck is in the shop.
Phil & Diane Madsen have shared an excellent "Sit vs Move" Decision Aid in "The Wire" ....the concept is the same...calculate your cost while you're not moving - Please read the article here!
So what do those two articles have to do with Financed Value Coverage?
It's not uncommon these days to owe more than your truck is worth.
If you owe a financing company $10K over the current ACV, it's obvious that you want the amount you owe that financing company to be included in your insurance. A few insurance carriers have stepped up to the plate to close this potential gap in coverage:
IF your insurance carrier includes "Financed Value Coverage", it means they promise to pay off the financing company for your loan amount. Sometimes this coverage is built into the policy, and sometimes you have to pay more for it, called "Gap Coverage".
If you choose a "Stated Amount" with Progressive, it will automatically include "Financed Value Coverage" for Commercial Auto policies in AL, AZ, CO, IA, IN, KY, ME, MN, OH, OK, OR, PA, SC & WI...the rest of the states will roll out later this year. (Once broader coverage comes out on an insurance policy form, it is automatically "Grandfathered in" to older policies...this is called Liberalization, FYI.)
Here's what it says from the Progressive site:
"We now include FINANCED VALUE COVERAGE on Stated Amount vehicles. In the event of a total loss, we'll pay Actual Cash Value or the amount owed on the loan---whichever is higher---up to a Stated Amount."
What this is saying is YOU are responsible for choosing a "Stated Amount" for your unit on your insurance policy. YOU are responsible for reviewing it as it changes. (Though we do our best at CIS to remind you, LOL.)
No insurance carrier will pay a higher Stated Amount than what the truck is actually worth (ACV) if there is no financing company involved. In other words, you can't insure your ACV $30K truck for $40K, and YOU collect the other $10K...it can only go to a financing company, bank, etc. (Can you imagine how many fraud claims there would be if we could all insure things for more than they were worth?)
Keep in mind that there are still plenty of trucks out there that are worth MORE than the loan amount. If you have a very small loan on your truck, common sense tells you NOT to use that loan figure...this is where YOU CHOOSE a Stated Amount that reflects the ACV.
So....you may not always KNOW the Actual Cash Value (ACV) of your truck... especially in Expediting due to the extra bells and whistles built into that truck so that you can actually LIVE in it.
This is where Phil & Diane's "Decision Aid" to help you "see" what it costs you to operate.
Then contact Bobby Snyder with FYDA or other reputable dealer. Learn how the market conditions and mileage have affected your truck's value to give you a true ACV versus your Financed Value amount.
Is your unit older and requiring more maintenance? Motor Carriers will be looking for Owner Ops with better equipment because your Safety Scores affect them.
Talk with the guys over at FYDA, and using your "Decision Aid", see if it's in your best interest to stay with your current truck or bite the bullet and move up to a newer unit now. Trucks are only going to get more expensive due to the cost of raw materials and market conditions.
Then call or email your agent to adjust your truck's Stated Amount to that Financed Value amount if it isn't already.
Stay Warm everyone!
Shelly Benisch, CIC
Commercial Insurance Solutions (CIS)