Odd Insurance Option

[Rick D]

When I got my BUS/Geico renewal, I spotted a optional coverage that they referred to as a partial depreciation waiver for FRP hulls, railings and masts. that, IMHO, is weird. Why would you depreciate those things anyway? BTW, the coverage is $50 on $1100, so it isn't particularly expensive, so heads-up to you with BUS.

Generally, the principle basis for depreciation is that the customer should not benefit from the action of a settlement. In other words, betterment. The theory is that you will take a lot better care of your sails if you know you will have 50% depreciation on your seven year old sails contrasted to getting a brand new sail with no contribution (depreciation) from yourself.

So, I really don't understand how you can be "bettered" by getting a new spar, or stanchion, or a hull repair (non-consumables). I asked and the underwriter who responded ducked the question. The reason I'm so curious is that I used to train adjusters once a very long time ago. FWIW.

 

[Don S/V ILLusion]

It’s a three option coverage choice - Partial depreciation waivers are a step between replacement cost and agreed value full coverage.

 

[Tally Ho]

... The theory is that you will take a lot better care of your sails if you know you will have 50% depreciation on your seven year old sails contrasted to getting a brand new sail with no contribution (depreciation) from yourself.

Wait...I just bought a new mainsail. Tore the old one in a blow (and less than controlled jibe).

Can I file a claim for that?

I wouldn’t think so (it was probably the original 30-year old sail).

Just curious.

I have insurance more for protection against something catastrophic (sinking, demasting), or liability for damage to someone else’s boat. Knock on wood, haven’t had a claim in 10 years.

Greg

 

[Rick D]

It’s a three option coverage choice - Partial depreciation waivers are a step between replacement cost and agreed value full coverage.

I've been out of this for decades (many), so I may not get the current state of things. However, my understanding is that Agreed Value simply sets the bar for valuing a total loss or constructive total loss; it doesn't waive depreciation which would apply to partial losses regardless of agreed value. Without agreed value, the (total) loss would be the cost of replacing your boat with one with like kind and quality. In process, you would find one like yours, and then compare the equipment and condition of it to yours on a plus or minus basis to establish what yours is worth. With an agreed value policy, you simply skip that step.

 

[Rick D]

Wait...I just bought a new mainsail. Tore the old one in a blow (and less than controlled jibe).

Can I file a claim for that?

I wouldn’t think so (it was probably the original 30-year old sail).

Just curious.

I have insurance more for protection against something catastrophic (sinking, demasting), or liability for damage to someone else’s boat. Knock on wood, haven’t had a claim in 10 years.

Greg

Greg, it depends. Practically speaking, when you consider the depreciation on your old sail and your deductible, I wouldn't recommend it regardless.

 

[Tally Ho]

Greg, it depends. Practically speaking, when you consider the depreciation on your old sail and your deductible, I wouldn't recommend it regardless.

That’s what I thought.
I also have an Agreed Upon Value policy, and think it works exactly as you said...in a total loss, I get the agreed upon value.

Greg

 

[Rick D]

Heads up! I just got off the phone with them. I added the coverage. I was told that they will depreciate the hull repair, spar replacement, railings, and hardtops by 10% per year (after 20 years of your boat's age) up to a maximum of 80% for replacement or repair. When pressed, I was told "that's how our claims do it; it's our policy". Yikes. I would urge you to explore this on your BUS/GEICO policy so that you are not left getting hit with a depreciation contribution plus your deductible even on a partial loss claim. The additional premium is not significant.
For the life of me, unless this "policy" is spelled out in the contract, I don't understand how GEICO can apply it in the real world unless claim customers simply don't push back. How am I any better for having a collision hole in my FRP hull repaired? (I only have the old CNA policy contract; not GEICO's; I'm going to ask for one.)

 

[Don S/V ILLusion]

That’s what I thought.
I also have an Agreed Upon Value policy, and think it works exactly as you said...in a total loss, I get the agreed upon value.

Greg

Depends how it's written. Some are written on loss, some limited only to total loss. Again, there are middle option choices which can be selected to vary premiums to suit any budget.

 

[Richard19068]

I was told that they will depreciate the hull repair, spar replacement, railings, and hardtops by 10% per year (after 20 years of your boat's age) up to a maximum of 80% for replacement or repair. When pressed, I was told "that's how our claims do it; it's our policy". Yikes. I would urge you to explore this on your BUS/GEICO policy so that you are not left getting hit with a depreciation contribution plus your deductible even on a partial loss claim. The additional premium is not significant.
For the life of me, unless this "policy" is spelled out in the contract, I don't understand how GEICO can apply it in the real world unless claim customers simply don't push back. How am I any better for having a collision hole in my FRP hull repaired? (I only have the old CNA policy contract; not GEICO's; I'm going to ask for one.)

I went around and around with them on this and even spoke to one of their attorney's. It is ridiculous that if I have an agreed on value policy and a claim that doesn't result in a total loss that they apply a severe depreciation "betterment" factor. As you said, I'm no better off with a new mast than my old one but that is the way they see it. They tried to make me feel better by explaining that it wouldn't take too much damage to consider the boat totaled and I would then get the agreed on value. At least that's what I think they said. I don't recall the depreciation waiver option. I'll have to go back and check that.
Thanks for bringing this up.

 

[Rick486]

My sister, who is an attorney and works in this field, constantly reminds me that "...insurance companies are not in business to pay claims....", and it is best to look at every issue through that filter.

 

[rgranger]

Can I file a claim for that?
Greg

Many years ago, I dinged the fender of my truck. Okay, it was more than a ding... and the estimate came back as ~$3,000 and some change. I paid my $1,000 deductible and filed a claim.

Seemed fair, I had been paying insurance for 12 years without a claim so I figured that was what it was for and I had paid forward....

So a month later State Farm adjusts my rates with a notice that my rates will return to their original state if I have no more claims in the next three year. I did the math and the difference was just slightly more than the $2,000 that State Farm had to cough up.

Insurance my A$$, I am paying State Farm every month for a hassle free loan when I need it down the road...

 

[Rick D]

Update: just got my renewal. GEICO did a major overhaul of its policy language and underwriting. They dropped my agreed value by 15% which I am OK with since I was going to do so anyway to reflect better the boat's market value. The premium went up 14% due to "the rising costs of providing insurance protection". However, it appears the issue with the depreciation "buy back" endorsement has been replaced. If you have an "Agreed Value" policy, depreciation is limited to sails, canvas, and other soft goods unless the boat is pretty new. After eleven years, they will depreciate running gear machinery (engines, trans etc. I am assuming) and generators. However, they also have an "Actual Cash Value" policy which would apply depreciation in the event of a loss. It does not, as the prior provision, say anything (either way) about depreciating a partial loss repair.

So, I'm of the opinion that this is a significant retreat from the rather preposterous position taken earlier regarding the application of depreciation and is much more logical all the way around. Good for them.

Totally collateral observation: I notice GEICO is advertising its boat policies without the BOAT US branding. I'm not sure what that is about; maybe to promote cross selling of GEICO policy offerings. I think it harms the BOAT US brand though IMHO.