Hervey Bay

What few tell you on the first attempt.
mahnamahna
Posts: 580
Joined: Wed Aug 02, 2006 4:48 pm
Location: Gosford NSW

Hervey Bay

Post by mahnamahna »

swanncat wrote:mahnamahna,

Be careful under insuring, I've heard stories of people insuring a vessel lets say for 250k when real value is 500k and
having had to make a total claim and being paid out 125k...They dont seem to like being didled on the premiums..

Brett
Brett I dont doubt that you are right, and insurance companies are among the most despicable, however I dont understand what you are saying. If you insure for $250k and have to make a total claim then $250k is the payout. In fact the insurance company is the big winner in the case of a total claim in this situation because the difference of $250k would never have been recouped in premiums. At say $2500 per annum premium difference (1% of $500k being $5k premium so in this case 1% of $250k being $2500), it would take 100 years for them to receive this much more in premiums so they win.

If $2500k a year is all the premium you can afford, its better to be half insured than not insured at all. So I wouldnt be complaining if I was the insured either. Agreed value is agreed value and its not just for those that wish to overvalue their boats because of an unrealistic value of their labor of love.

I got caught being under insured, with a theft insurance claim in my 20's. I used a broker, told him that my only possession of value was my stereo system and everything else was second hand and old so when I got the policy I didnt read it, when I made a claim for the value of the stolen stereo (the only thing stolen of course) I only got half me claim because there was a clause that said total of any single claim in case of theft cannot exceed 20% of total insured.

But so long as you check there are no such clauses, and you have an agreed value policy, I cant see how this would be a problem in the case of a total right off loss and being paid all that you had insured for. Not from a complaint against the insurance company that is. I would not be happy to lose my boat for half its value in the initial few years and intend to insure for its full value, but as the boat gets older, I get more experienced and I also get older and my income declines, I would consider an agreed value if I found I was struggling to afford the full premium and I cant see how this would be an issue for the insurer.
kjay
Posts: 149
Joined: Thu Oct 26, 2006 2:03 am
Location: brisbane

Hervey Bay

Post by kjay »

Paul, I have also heard the same story Swancat is saying about the value, The insurance company says since you only insured the vessel for half its value we will only pay you half of the value of the policy, I am guessing you should pose this question to an insurance company.
Thanks
John
mahnamahna
Posts: 580
Joined: Wed Aug 02, 2006 4:48 pm
Location: Gosford NSW

Hervey Bay

Post by mahnamahna »

kjay wrote:Paul, I have also heard the same story Swancat is saying about the value, The insurance company says since you only insured the vessel for half its value we will only pay you half of the value of the policy, I am guessing you should pose this question to an insurance company.
Thanks
John
I did, Club Marine, and they have an agreed value policy. Agreed value works either way, you can either over insure and pay the extra premium or under insure and pay a lesser premium, provided risk is relative, then the premium vs payout is relative and they dont care either way. But even if they did not, I still dont understand how an insurance company can

a) not pay out full value if the boat is written off if the boat is insured for that amount. The premium is a mathematic algorithm that is a combination of the risk vs the value of the payout, the higher either of those 2 the higher the premium, but risk being the same then the thing that increases the premium is the payout value, so ergo, lower payout lower premium, there is no duplicity in it, nothing hidden, it doesnt matter a tot if the boats is valued at 20 million, if you insure it for $250k the premium reflects that and fail to see what clause or issue they could possibly be using to justify a lesser payout.

Or b) not be anything but relieved when presented with an agreed value total loss claim, at their good fortune at having to pay out only half the boats actual value because the insured only paid for that policy. As I stated in my last post, they are miles in front, and the loss of paying out in full at the actual value vs the lost premium of someone insuring at half value and paying half premium is in their favor because as I said, they were never going to recoup that lost payout in premium because they understand that no-one will insure the vessel for the same amount (hence the same premium value) for 100 years.

The only area where under insuring can be a problem for the insured, is in the case of a partial claim where the value of the partial claim exceeds a certain percentage of the total insured value and their are clauses that limit their payout if this is the case, for example, you are insured for $250k on a $500k boat and have a lightning strike and it causes $100k damage, not enough to right the boat off and cause a total claim and there is a clause that says you are limited to 25% of total insured value, which in this case is $62.5K. Otherwise I fail to see how this could ever be an issue, both from a moral or a legal stance. They dont get the premium you dont get the total payout and they are directly linked.

BTW, I am not saying you are wrong, I am saying something is wrong and perhaps they did not read their policy properly but either way they have been severely ripped off.
Finally
Posts: 223
Joined: Sat Jul 04, 2009 9:24 am
Location: Cairns

Hervey Bay

Post by Finally »

Paul

I think the terms Agreed Value and Replacement Value come into play here.

From my limited understanding you are right in that if there is a total right off, then they are limited to the agreed value.

Partial claims is where the insurance company gets you because they base the amount of cover on replacement value - not agreed value.

If you have a $500K boat and insure it for $250K you are effectively saying that you are self insuring 50% of the value of the boat at launch time.

You have a lightning strike 5 years from now causing $100K damage (to use you example). The replacement value of you boat is now (say) $555K (to make the math easier to calculate) though the market value may, in fact, be lower. You haven't increased your agreed value with the insurance company so, effectively, you are now self insured for 55% of the replacement value ($555K replacement less $250K agreed value as a %). So with your $100K claim, they will pay only $45K and you find $55K.

And don't forget the excess as well as this will further reduce the level of payout - depending on the excess imposed.

Whether the reverse applies if you over insure so the insurance company pays a greater share of the repair cost, I don't know, but it makes logical sense. However we are talking about insurance companies and logic doesn't always come into play.

David
mahnamahna
Posts: 580
Joined: Wed Aug 02, 2006 4:48 pm
Location: Gosford NSW

Hervey Bay

Post by mahnamahna »

Hi David, yes you virtually need a law degree to fully understand an insurance policy, and dont even think of trusting a broker to sell you exactly what you are asking him for, they often know even less than you or worse, know but deliberately dont disclose everything in case it loses them the sale.

On the other side of the coin, through the boat builders (professional) I have met since starting my boat I have hear a couple of stories of people getting their full payouts on a total right off and buying the wreck of their boats back from the insurance companies and paying boatbuilders to rebuild the boat for less than the payout and walking away with their boat repaired and money left in the bank.

The boatbuilders in my shed have just rebuilt a totalled seadoo jet boat, a twin engined rocket that had one half of the hull torn out on its first day out (rich kids with a new toy). These things are close to $100k new and this was brand new minus one day at the bottom of Sydney Harbor. The new owner bought the wreck for less than $10k, paid about $8k for the hull repairs and is getting the engines fixed (that could cost anywhere up to $20k each - thats the cost of new ones if these cannot be salvaged) we wont know the engine outcome for a couple of weeks, but say they cost $10k each, thats a total rebuild cost of about $35k for a $100k boat. We figure he may be able to sell it for $50k and walk away with about $15k profit. The insurance companies dont have time to do stuff like this, they would just prefer to sell the bits that are left and walk away.

BTW, $100k for a twin turbo jet boat that is less than 20ft long. What the hell are people thinking?

So I guess the stories are not all one way.
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