How Does Moving Insurance Work?
Though as a professional moving company we take every precaution to avoid damage, any time an object is moved there is a chance some damage may occur. The majority of damage comes in the form of small nicks and scratches. Very occasionally, a piece is damaged enough that it must be replaced. Which brings us to the topic of moving insurance.
It is important to understand that moving companies do not offer insurance. They offer a level of liability for loss or damage called “valuation.” Though the mechanics of valuation are similar to insurance, there are big differences. If you would like a more technical definition of valuation you can find it in this description on the Federal Motor Carrier Safety Administration website. We will try to give you the less technical, but accurate, version here.
When a moving company says “we have insurance,” what they mean is THEY have insurance. What covers your goods is the agreement between you and the moving company. The only reason the moving company having insurance is important is to ensure there is sufficient financial muscle to be able to do the heavy lifting if a large problem occurs. Regardless of the size of the problem, the settlement is between you and the moving company.
A valuation agreement details how you and the moving company will determine the replacement value of an item if it is lost or irreparably damaged. There are two types of valuation agreements, Full (or Replacement) Valuation, and the Waiver of Full Valuation (called Released Value on the FMCSA website). Your moving company will define for you the terms and outcomes for Full Valuation. The Waiver of Full Valuation sets your outcomes to the Federal Minimum which is very thin coverage.
The accepted standard for the replacement value of an item in a US home is $6 per pound. This means a 200 pound couch can be replaced for $1,200. Most Full Valuation programs use this as a standard. If this is the standard for your move cover, you can expect your entire load’s weight, multiplied by $6 as the total value of your goods.
As an example, a 2 Bedroom home has on average 800 Cubic Feet of goods, which is 5,600 lbs. That means the full value to replace all of the goods in that home $33,600.
The Waiver of Full Valuation means you decline to cover your goods at the $6 level. The Federal Government has stipulated that moving companies cannot conduct moves with zero valuation cover, so they have set the minimum cover at $.60 per pound, one tenth of the actual average amount the goods in a US home are worth.That means given the same situation described above with the 2 bedroom home, the goods in that home are covered to the value of $3,360.
This is effectively having no coverage.
Think of it this way. If you waive coverage, you are treating your goods as though they are one tenth their replacement value. Your 200 pound couch is worth $120. Your 6 lb lamp is worth $3.60. If your goods are worth that amount, why pay hundreds if not thousands of dollars to move them?
Full Valuation Cover comes at a cost that is in addition to your basic move estimate. Moving companies charge different rates for the cover. Ask your moving company for their rates which can vary. The way you eliminate this charge is to waive cover, which we do not recommend.
What happens if one piece of furniture is destroyed or lost and you have paid for Full Valuation Cover? The way this works is straightforward. A total load of goods is the added weight of all items within that load. A 5,600 load in our 2 Bedroom home example is the weight of everything in the home added together. The total cover is $33,600. The cover per item is governed by the weight. That means a 200 pound couch is deemed to have a replacement value of $1,200. A 5 lb lamp has a replacement value of $30. If one of your items is destroyed or lost, the weight of that items multiplied by $6 will be the settlement basis.
What if your couch is worth more than the $6 per pound average? Then it is a Special Item. It is critical to understand that $33,600 in total cover does not mean that $3,500 Louis the XVII sofa your grandmother gave you is covered for $3,500 unless you arrange Special Item cover. That means you call out that item, in this case the sofa, as having a unique value and the rate for the Full Valuation will be adjusted upward accordingly. Each moving company has their own rates for this Special Item cover.
This is an important point to understand.
We all usually have a few items of higher value than average, then most of our “stuff” is average. When a potential customer discusses insurance and valuation with their movers they are usually picturing replacement coverage for their single high value items. When a mover discusses insurance with a potential customer they are picturing valuation liability for aggregated loads and average amounts for individual items. Thus the two parties are often talking past each other and that leads to discomfort down the road if a problem occurs. You now know how a customer can say “I thought I was covered” and the mover can reply “You were” and the miscommunication between the two is absolute.
Another incorrect assumption that is sometimes made is that any scratch or blemish to an item that occurs during a move results in full replacement of that item with a new item. Not so. Full Valuation cover has a “repair, then replace” approach where the first option is for the moving company to repair the item. Wood furniture can always be repaired. Upholstery can be repaired. And the average cost of such repairs is around $300.
What about the oil painting that was rubbed on the surface that cannot possibly be repaired other than sending it back to Amsterdam so it can be restored with period brushes by a living, breathing Dutch artist? If it was not called out as a Special Item with is own value, that 20 lb painting will have a settlement value of $120. If it was called out as a Special Item, the settlement will be either 1) a payment to cover the next flight to Amsterdam for a restoration in the Dutch studio or 2) a payment of the replacement amount specified in the Valuation agreement, whichever is the less expensive option. The moving company chooses the path of remediation, not the client. And notice the specific method of settlement, a payment. Moving companies don’t keep woodworkers, upholsterers or Dutch artists on staff. They cover costs as specified in the valuation agreements and you will then take the settlement payment and find the specialist of your choice to solve the problem. If that specialist is more expensive than the settlement, you will have to cover the difference as which specialist you choose is a matter of your taste, trust and choice.
Which brings up the idea of “emotional value.” We all have a different perception of items based on their place in the narrative of our lives. Full Valuation does not compensate for emotional value. If the 4lb antique walking stick is broken the Full Valuation Cover would be 4lb x $6 = $24. If that walking stick was carried by your great-great-great uncle as he trekked from Tennessee to Texas with Davey Crockett and serves as your family’s irreplaceable totem, the Full Valuation settlement amount is $24. Unless, of course, you call it out as a Special Item at which point you specify its value and pay the additional cost for cover. The point is that valuation cover, and all remedies in an unfortunate damage or loss situation, is a financial discussion that follows the rules and approach outlined in the valuation agreement that occurs before the move.
Damage is as uncomfortable for the moving company as it is for you. All moving companies work hard to avoid it. Unfortunately, it happens. We hope this framework clarifies the approach, cost methods and remedies and we wish you the best of luck on move day.