R2I Shipment - Choosing from Insurance Options and Our Experience

The major insurance options available for R2I shipments are:
  • Total Loss Insurance: This is the most economical insurance coverage option. It is applicable only if the entire shipment is lost due to a catastrophic incident. Exclusions at the discretion of the underwriter further limit the scope of the insurance. The coverage amount is derived from the value declared by the owner and the premium is typically a percentage of this declared value: 2.5% is the norm. An advantage offered by this option is that Packed by Owner (PBO) shipments are covered as opposed to only those packed by a professional moving company.
  • Full Replacement Value – Valued Inventory: Only items declared by name and value are covered in this category. Pricing hovers in the vicinity of 3.5% of the declared total replacement value of the items listed.
  • Full Replacement Value – Lump Sum: Under this comprehensive insurance choice, the entire shipment is covered. Pricing is structured along the lines of Full Replacement Value – Valued Inventory option in that it calls upon the customer to maintain a High Value List limited to items valued above $500. The requirement is to purchase coverage for the total amount listed in the High Value List plus coverage at $6 per pound minimum for the rest of the items. e.g. – if high-value items add up to $10K and the weight of the remaining items add up to 3000 pounds. The requirement will be to take coverage for $28K ($10K + 3000 * $6).

In addition, shipping carriers usually have carrier liability insurance, a nominal insurance that covers shipments by weight (the norm is $0.60 per pound) while in their possession. Although the coverage is all right for a freebie (as the average weight for household goods in a 20’ container is over 6000 pounds the average value of the coverage is around $3600), the major limitation is that it does not apply for the shipping carrier’s origin and destination services – only those durations when the shipment is actually in their possession is covered. One additional option that some shipping companies offer is insurance against named perils such as theft, burglary, and specific accidents.

Be mindful of the caveats below when deciding on the type of insurance to opt for:

1. Valued Inventory or High Value List: This list is mandatory for the Full Replacement Value insurance options. The drawback is that unless the customer diligently jots down replacement values for the items, he runs the risk of being under-insured, thereby reducing the actual coverage.
2. Co-Insurance (Underinsuring):  Whether the shipment is classified as under-insured and by how much determines the settlement compensation amount in case of a claim. A common scenario of a shipment being classified as under-insured is when adequate coverage is not opted as per the terms of the ‘Full Replacement Value- Lump Sum’ option. For e.g. -
  • If high-value items add up to $10K and the weight of the remaining items add up to 3000 pounds, the requirement will be to take coverage for $28K ($10K + 3000 * $6).
  • If the coverage opted is for only $20K, the shipment excluding the high value items will be classified under-insured by 44.44% based on (100 – $10K/$18K*100).
  • Filing a claim for $1000 will result in a payment of only $555.60 ($1000 * (100-44.44)), if the items are not from the high-value list.
3. Exclusions: Exclusions are items excluded from any insurance coverage. Obvious items include small but high-value items like jewelry, watches, gemstones, cash, collections, etc. One exclusion clause that can come back to bite at claim time is that insurance companies exclude furniture made of processed wood. For many R2Iers, that single clause eliminates the bulk of the furniture in the house. Here is a sample exclusion clause from the insurance company – “Damage to any furniture constructed of veneered chipboard, particle board, composite board, or similar. Any reduction in quality thereof arising as the result of dismantling or reassembling of any such items of furniture is also excluded”.
4. Deductible: A deductible usually applies for all claims. The norm for deductibles on Total Loss Coverage is $500 and for All Risk Insurance Coverage is $250.

On our part, we went with “Full Replacement Value – Valued Inventory” insurance. The piano and the wooden and leather furniture featured in our valued inventory list. The total value added up to around $10K and our insurance cost was $350. The move was almost flawless – minor damage to a couple of items and loss of at least one box of clothes – unfortunately; we realized the loss of clothes only after two months. Looking back, we probably would choose the same option if we have to go through another move. ‘Full Replacement Value – Lump Sum’ is a better coverage but in our opinion, cost-prohibitive – for in our case, the insurance cost would easily have crossed $1K.

Related Posts:
  1. R2I - Deciding on What to Take.
  2. R2I Shipment - Choosing from Insurance Options and Our Experience.
  3. R2I Shipping Options.
  4. R2I Shipping FAQ.
  5. R2I Shipping Experience.

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