Ask Gary: Are you underinsured? A totaled truck leads to an $18,000 surprise…

Ask Gary is a series from Overdrive detailing common owner-operator business challenges and how operators can navigate toward success. Gary Buchs, a former Owner-Operator of the Year, spent 17 years as an independent contractor at Landstar before retiring in 2019. He now coaches owner-operators and also hosts the Truck Business Forum group on Facebook. Buchs can be reached at truck.biz.coach@gmail.com.Ask Gary is a series from Overdrive detailing common owner-operator business challenges and how operators can navigate toward success. Gary Buchs, a former Owner-Operator of the Year, spent 17 years as an independent contractor at Landstar before retiring in 2019. He now coaches owner-operators and also hosts the Truck Business Forum group on Facebook. Buchs can be reached at truck.biz.coach@gmail.com.

Deeming your truck’s value is an important question in regards to insurance coverage. Gary Buchs breaks down what happened to one of the owner-operators he coaches and discusses ways to avoid having too little or too much insurance.

The situation: An owner-operator’s rig was badly damaged by another tractor-trailer in a crash, and the insurance company totaled the truck. The operator was anxious to resume working, but his insurance company said it would be six to eight weeks before they could render a settlement, holding him up from buying another tractor.

The insurer eventually valued the truck at $18,000 more than what he had it insured for, meaning he missed out on receiving that much more for his totaled rig.

He at least received enough to pay off what was owed on the truck, plus another $10,000. But the additional equity he missed out on he could have put toward another truck or simply saved. Instead of receiving $10,000 after paying off his loan, he could have pocketed closer to $30,000, minus the extra cost of the higher premiums he would have been paying.

Gary’s fix: Because this guy was paying for around $34,000 in coverage for a truck valued at over $50,000, he’s going to try to go after the carrier of the driver that hit him, and their insurance company, to cover the difference. But that’s going to take a lawyer, meaning more time and money, and no guarantee of success.

How do you determine the right value for insuring your truck?

The first way is to ask your insurance company what they think the value  is. They’re the ones who are going to value it. They’ll send out an adjuster to look at the equipment and determine a value.

Another way is to look at for-sale ads for comparable trucks. But that only really tells you what the asking price is, not necessarily how your insurer would value the truck.

I talked about this recently with an insurance contact, who recommended going to local dealers in your area and having them give you a quote on the truck. Not a trade-in value, but what they deem the truck’s actual market value to be. She also recommended hiring a third-party adjuster for an appraisal.

And if you add value to your truck, like a major overhaul, replacing the engine or adding an APU, you need to contact your insurance company to see if that’s covered or to have your value adjusted.

That’s what tripped up this owner-operator and explains my surprise at the high value on his 2015 model truck. He put an APU on about a year ago but didn’t add that to the policy. A new APU easily pushes the valuation up $8,000 to $10,000. He also had put a new transmission in about 18 months ago, and he had recently upgraded his wheels.

You need to update your insurance at least once a year. Have that on your annual to-do list. There are administrative tasks like that we just don’t like to do — checking on our retirement accounts, checking on health coverage, updating our truck insurance coverage. But you need to do these check-ins at least once a year.

You don’t want to overpay for premiums on a truck that’s over-valued. But you also don’t want to wind up on the losing end if your truck is totaled or you have to pick up repair costs.

This situation mostly worked out for this owner-operator. He was able to buy back his totaled truck for $1,000 and keep the new tires and wheels as back-ups. He could also sell the transmission and engine. Or, he could simply sell the truck as-is to an individual or to a company like LKQ.

He ended up using some of his savings to buy a newer truck for cash, so now he no longer has a payment. But that still doesn’t erase the nearly $20,000 left on the table for being under-insured. —Gary

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