Moving Company Insurance Tip: Explaining the risk of under-insurance (co-Insurance)
Customers rely on their moving companies to safely transport personal belongings. If customers are not appropriately educated, they also expect claims to be paid in full if items are damaged lost or stolen.
It can be an unpleasant surprise for customers, and a negative experience for moving companies, when customers discover that claims may not be paid in full. Fortunately, you can avoid these awkward situations with clear communication about coverage and the risk of under-insurance – specifically as it pertains to the co-insurance clause.
Below, we’ve broken down the coinsurance so you can easily explain it to your moving customers.
What is the coinsurance clause?
Many insurance policies contain a co-insurance clause that penalizes a policyholder if the amount of the insurance purchased is not for the full replacement value of the item(s) insured. The coinsurance clause prevents the insurance company from covering the full loss if the valuables were underinsured. If a customer doesn’t purchase insurance to cover 100 percent of the contents’ value, he or she will not be fully reimbursed by the insurance company if valuables are damaged, lost or stolen.
How to calculate:
There is a basic equation used to calculate the amount of risk the policyholder assumes when insuring belongings:
(Actual amount of Insurance / Required Amount of Insurance) x Amount of Loss = Amount the insurance company will pay, minus any applicable deductible.
Example: A customer has an item valued at $10,000. He insures the item for $5,000. The item is damaged during transit, and the repair cost is $1,000.
The item is underinsured by 50% ($5000 divided by $10,000 = .50 co-insurance factor). The carrier will then apply the co-insurance factor to the repair cost. In this case, the repair cost is $1,000. Multiplied by the co-insurance factor of .50, only $500 of the repair cost is allowed. The certificate deductible is then applied to this amount.
Why is it important to explain the risk of underinsurance?
When the customer decided to underinsure his belongings, he likely did so to save money – his savings could have been $100 or less. Ironically, that decision to save money ultimately cost him $500 more. By having all the facts up front, the customer can make an informed buying decision.
Furthermore, this customer will probably say that moving company never told him about the coinsurance clause and will proceed with writing a negative online review. If you consistency and clearly communicate this information, and even explain it on your website, you’ll be more prepared to defend your company if it you’re ever unfairly criticized online.
In conclusion
It is extremely important to be upfront about all the costs and fees associated with the moving process; it’s a part of excellent customer service. Take time to review the details of the contract including insurance expectations with your customers. Show them an example of what could happen in they underinsure their belongings. Proactive moving insurance communication creates a better experience for the customer and helps avoid negative and awkward situations for your moving company.
Finally, if you haven’t already done so, cover your customers’ goods and insure your moving company with smart, strategic full value protection insurance. Get it before the busy season!
