How much of your moving insurance contract do you understand? If it includes a coinsurance clause, do you know what that means? Don’t feel bad if you don’t.
When handed an insurance contract, you might be tempted to skim over the dense terms and sign on the dotted line without fully understanding what you’re agreeing to, but this can go wrong in any number of ways. The better route is education.
Let’s look at one of the most confusing – and important – clauses you might encounter in your moving insurance contract: the coinsurance clause.
The Definition of Coinsurance
Coinsurance refers to insurance in which the responsibility is shared. Specifically, if a loss occurs, the payment of the loss will be shared between the insured and the insurer.
Let’s put that in plain English. If something happens to your stuff, the insurance company pays a percentage of the loss. You pay the rest of it.
Let’s look at a hypothetical example of how coinsurance might work.
Imagine you own an antique hand-carved armoire. It’s worth $8,000, but figuring that damage is more likely than complete destruction, you’ve decided to cut costs by insuring it for only $2,000 (or 25 percent of its real value).
During the move, the armoire is damaged. The cost to repair it will be exactly $2,000. Thinking the insurer will pay for everything, you praise yourself for your impressive foresight.
Unfortunately, your celebration is premature.
The coinsurance clause means that the insurer only pays a portion of the loss – the percentage of value that you actually insured. In this case, that portion is 25 percent ($2,000 out of $8,000). So, the insurer pays $500 (25 percent) of the $2,000 damage. You pay the remaining $1,500.
Once you realize this, you stop celebrating.
First, when you receive a contract, make sure you understand it fully before signing your name to it. That little clause you didn’t think mattered might end up being crucial.
Second, avoid the temptation to skimp.
In many ways, insurance is a lot like a seat belt. It might seem like a nuisance, and if nothing goes wrong during your trip, it might also seem unnecessary. But you wear a seat belt anyway, just in case.
Insurance is similar. It can seem like a nuisance, and if you skimp and nothing bad happens, you might think you made the right decision – but insurance isn’t there for when nothing goes wrong. It’s there to protect you when there’s a problem.
You wouldn’t use a damaged seat belt, so why would you settle for inadequate insurance? With full coverage, you can rest assured that you’re protected no matter what.
Need a moving insurance quote? We can help with that!