Used Vehicle Prices Keep Climbing
Are You Insuring Them For What They’re Worth?
The worldwide shortage of microchips—essential components in today’s vehicles—that began with the pandemic’s eruption in March 2020 continues to slow down the production of new semi-trucks. With these big rigs in short supply, many potential buyers have diverted their attention to used tractors and trailers, which, in turn, has caused their prices to skyrocket.
Consequently, with Owner Operator Direct long-haul trucking insurance policies, along with the commercial trucking policies of most other insurance companies, rated on a stated amount basis, it is imperative for policyholders to have a good knowledge of how their trucks are equipped, and make sure those vehicles have current and accurate values assigned to them. For vehicles that are covered on a stated amount basis, the policyholder places a dollar value on the equipment, and the policy premium is determined using the value they have assigned.
Accurate stated amounts are vital because they affect how Owner Operator Direct processes and pays claims. In the event of an accident, our claims representatives will compare the stated value policyholders provide to us against the vehicle’s actual cash value (ACV) at the time of the accident, and pay out the lesser of these two amounts. That is why the stated amount needs to be as accurate as possible.
Although people may be saving a few dollars on their premiums by having a stated value below market value for their vehicles, Owner Operator Direct will not be able to pay the insured what the vehicle is worth in the event of a loss. Let’s take a look at some examples:
EXAMPLE 1
When a policyholder first insured his 2016 Kenworth sleeper cab two years ago, he provided his insurance company with a stated value of $30,000, and he has not updated the vehicle valuation since. An accident occurs, resulting in a total loss of the vehicle. While the ACV of the truck on the date of the accident is $68,000, the insured is only compensated for the stated amount of $30,000, minus any deductible that might apply.
EXAMPLE 2
At policy inception, an owner operator provided her insurance company with a stated amount of $50,000 on her 2018 Wabash reefer trailer, despite having just paid $65,000 to purchase it. A total loss occurs shortly after insuring the trailer. The policyholder receives the lesser of the stated value and ACV…in this case, $50,000, less the deductible.
In both scenarios, the payouts that these policyholders receive may not be sufficient to replace their equipment in the current market.
Of course, it’s not wise to overvalue vehicles either. Remember, the policy premium is based on the stated amount the policyholder provides. So, if the stated value is higher than what the vehicle is actually worth, the policyholder may pay more premium than necessary. This is another reason why the stated amount needs to be as accurate as possible.
With the price of used semi-trucks and trailers at all-time highs, it is strongly recommended that policyholders review their policies and, if necessary, update the stated amounts. Insureds should consider the condition, mileage, special equipment, and any modifications and upgrades, and consult with local dealerships that sell similar vehicles, semi-truck manufacturers, lenders that specialize in commercial vehicle financing, and used commercial vehicle valuation guides when assessing stated amounts.
While recalculating the value of each affected vehicle and updating the insurance policy requires a little time, doing so now and at renewal time will help policyholders ensure their stated valuation is in line with current market prices, and that there are no surprises in the unfortunate event of a total loss.
Owner Operator Direct provides top notch commercial trucking insurance to owner operators, whether operating with authority or as leased drivers. For a no-obligation quote, give us a ring at 800-499-1044 (Monday-Friday 9-5 pm ET) or answer some questions online and we'll email you one.