Insuring Your
Corvette
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What should I look out for when insuring my
Corvette?
Info From: Phil Gunsul (prg@mgweed.att.com)
STATED AMOUNT
Additional research revealed there are, in fact, two types of stated policies.
One is a stated amount policy in which the premium is based on
an amount stated by the insured. Losses, however, are still based on the
actual cash value (ACV) of the property at the time of loss, but not
to exceed the stated amount. To pay the stated amount automatically
would create a moral hazard in that policy holders could overvalue their
cars, thus making a profit. This is contrary to the basic principle of
indemnity
which is to restore a person to the position they were in before the loss.
(Mr. Flippin contends, however, Nationwide effectively removed the moral
hazard by having their agent inspect the car prior to issuing the policy.)
STATED VALUE
The other is a stated value policy, which is a true valued
type of policy where both parties agree, in advance, as to the value of
the property. In the event of a total loss, the company will pay the full
face value of the policy. It turns out this is an Inland Marine type of
policy generally used with works of art, boats and other marine equipment.
There are a few companies, however, that do offer it as an automobile policy.
This difference may be the reason for the wide misconceptions about stated
value policies. Mr. Flippin asked eleven different Nationwide agents how
the company would settle a stated value policy. None of them corrected him
by saying they were actually *stated amount* polices, five of them said
the company would pay the full stated amount and five of them did not know.
Only one actually knew the company would not pay the stated amount in the
event of a total loss. He said he chose not to sell that type of policy
because the insured pays an additional premium and receives no additional
protection. In fact, the insured receives less protection. The
standard indemnity policy pays the ACV at the time of loss with no limit
on the company's liability. The stated amount policy still pays the ACV
at the time of the loss, but the company's liability is limited to the stated
amount. For example: Assume a car has an ACV at the time of loss of $10,000.
For an $8,000 stated amount policy, the company would only pay $8,000, where
they would pay the full $10,000 under a standard indemnity policy. The
insured pays an additional premium for the "privilege" of limiting
the insurance company's liability.
ADVICE TO OTHER OWNERS
If you have a stated value policy and have not yet suffered a loss, it is
suggested, in the strongest possible terms, that you read it, paying
particular attention to the section entitled "limits of liability."
The words STATED AMOUNT on the declaration page is a red flag. Read
the respective endorsement very carefully. More than likely, it is
based on ISO form E167 which states:
"The limit of the company's liability for loss shall be the lesser
of:
- (a) the stated amount shown in the Declarations,
- (b) the actual cash value of the stolen or damaged property, or
- (c) the amount necessary to repair or replace the stolen or damaged
property."
Unless it was written by one of the few companies issuing such policies,
[ the article later list them as Central Mutual, Chubb, Midwestern Indemnity
and Zurich-American. - PRG ] you probably will find the policy does not
say the company will automatically pay the stated amount in the event of
total loss. In addition, discuss this with your agent immediately. Ask the
following questions:
- 1) Will the policy, in fact, pay the stated amount in the event of a
total loss?
- 2) If no, why did you buy it?
- 3) If yes, have him show you where it says that in the policy.
- 4) Will the company insure the same car under a standard indemnity policy?
- 5) If so, what would be the premium?
- 6) What additional consideration are you receiving by paying the additional
premium?
FINAL RECOMMENDATIONS
Remember, have your agent show you, in writing, where it says the insurance
company will pay the stated amount in the event of a total loss.
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