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 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.
Breaking it down in simpler terms, a valuation agreement details how the replacement value is determined if an item is lost or irreparably damaged. Let’s use an example of nice living room chair that retails for $420 at the specialty furniture store.
If that chair went missing and the agreement between you and your mover was a basic valuation, which is included in the cost of the move, the valuation of the replacement cost will be $.60 per pound. A chair of this type will probably be around 70 lbs, so you will receive $42 in compensation for the missing chair. Comparing that to your receipt from the specialty furniture store immediately shows the problem with basic valuation for individual items.
Alternatively, if you purchased full valuation with deductible you would have paid an additional amount for the mover to assume a higher level of liability. If you had chose full valuation with a $500 deductible then you would be compensated $170 for replacement of the chair assuming that chair was the only piece that was damaged.
The cost for full valuation depends on the value of the total load and the deductible chosen. A typical full 26 foot truck would have around 10,500 lbs of goods with an average value of $63,000. Majestic’s current pricing on a $63,000 load would be $945.
So is it worth it to pay for higher liability? It depends on if you look at your load piece by piece or as a total load. The mistake people make is they think they are buying insurance for individual items. Not so, and let’s go back to our chair example compared to the total load to illustrate.
What you buy with the increased liability cover is protection for your entire load. For example, let us imagine the driver of your truck accidentally parked beneath the world’s largest magnifying glass at high noon and he missed the sign saying “Don’t Park Moving Trucks Here.” All your goods were incinerated and the moving company is at fault in the weirdest moving accident in history.
If you had purchased full valuation you would be compensated the $63,000 at which your load was valued. So you have $63,000 minus your deductible ($250) minus what you paid for the cover ($411) leaving you a net $62,339. Not a dollar for dollar replacement but you can restock your home in the style you lived in previously.
If you had remained with the basic coverage you would receive $6,300 compensation (10,500lbs x $.60). The simple math shows that is a $56,039 difference from the full valuation. If we view the glass as being 10% full, you would have a chance to explore a more downsized lifestyle.
Compare that stark difference in outcomes to the circumstance of your living room chair somehow going missing. You paid $411 for the higher liability, the chair was lost, and you got $250 back. You are “out” the cost of the chair ($420) plus the liability cover payment ($411) and got back your compensation payment ($250) which means totalled up you are “out” $581. If you had accepted basic liability you would be “out” the cost of the chair ($420) and got back a compensation payment ($42) so you would be “out” a total of $378. Seems better to go with basic level of liability if you look at only one item.
And you have to consider the likelihood of the total loss versus the loss of one item. Both are unlikely, but they have different levels of unlikeliness.
This is the important point to understand. When a potential customer discusses insurance with their movers they are usually picturing replacement coverage for single items damaged. When a mover discusses insurance with a potential customer they are picturing valuation liability for aggregated loads. 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 replying “You were” and the miscommunication is absolute.
The best and most likely outcome is that we not park our trucks under giant magnifying glasses and every living room chair is carefully loaded and accounted for. That leads to happy outcomes. To be prepared for the unlikely event of a loss, let’s have the valuation liability conversation up front so you can make the right choice for the level of coverage you want to have in your upcoming move.