The owner- driver subcontracting business model has become a major feature of the Australian transport sector. Drivers of trucks and courier vehicles are often now in effect small businessmen, whose major tangible asset is their vehicle. Protecting your livelihood means protecting your vehicle. Sadly, many standard insurance packages leave owner-drivers short- changed when it comes to replacing a vehicle damaged beyond economical repair. The key to avoiding this pitfall lies in understanding an important distinction – agreed value, versus market value.

Market Value Insurance

You could be forgiven for thinking that the value you gave for you vehicle when you bought your insurance would be the sum you receive in the event of a loss. But that figure is merely use to compute the premium. The majority of insurers limit total loss cover to “market value. In the event of a total loss, they will only pay out the “book” value of the vehicle”, a figure which depreciates continuously. This is often far below the cost of replacement, and may well fall short of your outstanding finance obligations. This has come as a very unwelcome surprise to many owner-drivers.

Agreed Value Insurance

Complete clarity should be the first goal of any insurance package. As in any field, achieving the optimal solution requires striking a balance between retained risk and the cost of insuring them. This balance will be significantly different between the owner-driver and the private motorist. As its name suggests, Agreed Value cover brings clarity to your insurance arrangements. It enables you to ensure that whatever happens to your vehicle, you know what the payout will be. You can cover yourself for the replacement of the vehicle, at any time in the life of the policy.

If you’re unsure about the insurance valuation of your key asset, give the motor insurance team at GSK Insurance Brokers a call today. We believe owner-driver motor insurance should be tailored to the operational realities of the driver’s business. Options, such as cover for temporary replacement of damaged vehicles undergoing repair, deserve careful consideration, under expert advice.

September 21, 2016

By Graham Knight

Founder and Managing Director of GSK Insurance (established in 1981). Graham draws upon more than 50 years’ experience in the insurance industry, working in both insurance and broking across various private, public and government sectors in Australia.

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