Insurance vs. Valuation

It pays to know the difference

The Smiths were avid antique collectors, traveling from one estate auction to the next in search of rare finds. Over the years, the couple amassed an impressive collection of furniture and paintings. When faced with moving the antiques from New York to California, they began contacting moving companies.

A salesperson from the local moving agency came to visit, and the Smiths discussed their concerns regarding the handling of their antiques. The salesperson explained the "replacement value coverage" the Smiths could purchase. He even included the change for this "replacement value coverage" in his written estimate. Based on the salesperson's comments and the written estimate, the Smiths felt confident that the van line had them "covered." With their belongings adequately "covered," the Smiths proceeded with their move.

The van line provides customers with valuation options through its lawfully filed tariff, interstate Bill of Lading, or contract carriage agreements. Valuation protection is a tariff level of carrier liability and referring to it as "insurance" is incorrect and misleading.

The concept of valuation is based upon transportation and carrier law. Historically, valuation was intended to enable the shipper to indicate the limit of liability a carrier was incurring and, in exchange, to allow the carrier to charge a higher rate when undertaking a greater limit of liability on a shipment. Therefore, a shipper could pay a lower transportation rate by not requiring to undertake as great a limit of liability for loss and damage.

To safeguard your concept of coverage, you should ensure that you understand this topic, all paperwork presented to customers indicates "valuation". Further, avoid any idea that you have "insurance" when speaking with moving companies. Before you hire a mover, take these precautions to understand what you are getting, understand the basic differences between "valuation" and "insurance".

Originally, the released value for a shipment was established on a per pound basis. Today, the lowest level of protection for common carrier interstate household goods shipments is $.60 per pound per article. If a greater value is declared by the customer, there is an additional charge above the basic transportation rate. Van lines generally offer the following valuation options through its tariff.

Full Replacement Protection

"With No Deductible" has no deductible and protects the customer for the cost of repairs or the replacement cost of irreparably damaged items or items documented as missing from the shipment. Customers are protected from the first dollar of loss to a maximum settlement of the total released value. "With A Deductible" is the same as the "No Deductible" option, except that a selected deductible level applies on damage claims.

Under either plan, the van line is liable for any repairs or the cost of repairs for transit-related damage to the extent necessary to restore an item to its original condition when received by the van line. The customer agrees that the declared or released value of the shipment shall be minimum value of $4.50 per pound times the actual weight of the shipment, whichever is greater; and is further subject to a minimum lump sum valuation of $10,000.

"Carriers' Minimum Liability"

"Carriers' Minimum Liability" the most basic plan, provides a released value of $.60 per pound per article at no additional charge to the customer. The customer on the Bill of Lading must elect this level of valuation in writing.

Insurance was developed to spread the risk of loss. Typically, it involves a contract by which an insurance company agrees to indemnify its insured against loss from perils expressly stated in the insurance policy. While a claim arising from interstate transportation is settled in accordance with federal regulations, the terms of a carrier's tariff and Bill of Lading, and the released value chosen by the customer. Claims under insurance policies must often be settled in accordance with the provisions of the policy and the state's insurance laws.

The Difference between Valuation and Insurance

Valuation

Has its basis in transportation law. Is a level of liability the carrier agrees to assume and, depending upon the level of protection requested by the customer, may result in higher transportation rates. No Co-valuation is applicable. Limits liability to the time in which the goods are in the care, custody and control of the carrier's actions or failure to act that are not excluded by the provisions of the Bill of Lading and tariff. Is regulated by the Department of Transportation (DOT). The methods of handling claims are specified in transportation rules and regulations, the carrier's Bill of Lading and tariffs. The shipper has nine (9) months from the date of delivery to file a claim with the carrier, and two years from the date a claim was denied to file suit. The delivery of a shipment is recognized by the destination address on the carrier's bill of lading. Therefore, a delivery to a mini-storage location or the location of choice by the customer is the final delivery address as referenced by the carrier.

Insurance

Was developed to spread the risk of loss. Is a contract in which the insurance company, for a premium, agrees to indemnify the shipper against loss from perils expressly stated in the policy. A co-insurance is covered for listed perils and must show that a loss occurred and was a listed peril. Is regulated by each state. There may be 50 different sets of regulations and laws, which cover policy rates, claim procedures, statutes of limitations and policy limits.

Note: This is an example only.  Please review coverage with your broker.