REDi – Commercial Motor Vehicle Insurance

Commercial Motor Vehicle Insurance

This type of insurance is designed to protect a vehicle used for business against loss, damage and theft including your liability to third parties in connection with the vehicle. There are many insurers that you can choose to insure your vehicles with however as with all insurance policies there are many variations to the cover provided. It is important not to focus solely on receiving the cheapest premium but to balance premium with the coverage of the policy. Areas such as Loss of Use, Agreed Value versus Market Value and Modifications such as fit outs with shelving and lock boxes. Loss of Use This is an option under commercial motor vehicle insurance where the policy extends to cover your business where loss to an insured vehicle prevents you from using it after a claim for damage or theft has been accepted. Generally covered under this extension are the costs of hiring a substitute vehicle, reasonably and necessarily incurred by you. The compensation for the substitute vehicle begins when the insured vehicle is delivered to the repairer to start the repairs or from the date of accident if your vehicle was totally disabled or lost at that date. When purchasing this extension you can specify a weekly amount that you would require to hire a similar vehicle and the maximum number of weeks. The excess applying to this extension is in days, usually seven, meaning that you have to pay the first seven days of hire and then the insurer will pay the balance up to the limit you purchased at the commencement of the policy or when your vehicle has been repaired. Agreed Value vs Market Value Most policies are purchased on a market value basis, this very simply means that in the event of a claim the current market value of the vehicle will be used. For example, if you have your sum insured set at $40,000 but the market value is only $30,000 the insurer will only pay $30,000. When purchasing insurance or reviewing it at renewal it is important to give realistic consideration to setting the sum insured in order to pay a premium that fairly represents the amount you would be paid in the event your vehicle is written off. Sums insured in most cases should be set exclusive of GST with the policy adding GST in the event of a total loss. Your broker or insurer will be able to guide you on this further. If your policy is an agreed value basis it sounds like the sum insured is what you would get. However, some policies have a clause limiting the agreed value to a parameter of plus or minus 20% of the market value. It is always best to ask your broker or insurer about this before purchasing the policy. Some policies can be true agreed value when a valuation is supplied at each renewal. Modifications When purchasing any type of vehicle insurance it is important to inform your broker or insurer of any modifications to the vehicle. Modifications are any changes to the vehicle that are not factory, this can include adding roof racks, changing the wheels, side skirts, signwriting and fitted tool shelving or boxes. The insurer will then include these modifications on the policy which ensures in the event of a claim the market value reflects this. It is important to always refer to your policy wording for full coverage details.