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How much do I Insure my Bus for ?

Before the renewal of your motor fleet insurance each year we ask you to review the sums insured on your buses to ensure that you are adequately insured.  

It’s very important to get your sums insured right, too low and you could find yourself out of pocket if a loss was to occur, and too high and you could be paying more for your insurance than you need to. There is a definite balance which needs to be considered and overcome.

So where do you begin?

It all starts with understanding how your Buses are insured, this is called the “basis of indemnity”, which for commercial motor fleet insurance policies is “Market Value”.

The Insurer will require you to declare a sum insured for each insured vehicle (including all its accessories) which reflects the current “Market Value” (including all of its accessories). This Sum Insured now becomes the maximum that will be paid under a policy, with the Basis of Settlement being “The Sum Insured or the Market Value at the time of the loss, whichever is the lesser”.

Whilst this sounds like it will only apply if your vehicle becomes a “total loss” (where the cost of repairing your Insured Vehicle plus the value of the salvage (if applicable) exceeds the Sum Insured or Market Value, whichever is the lesser), this is not always true. A number of Commercial Motor Fleet Policies still include an “Average” or “Co-Insurance” clause.

This clause sets out how much the insurer will pay if you Sum Insured is less than the Market Value at the time of the loss. Whilst there is a prescribed calculation, the general effect is that if you underinsure your Bus by 50% then the insurer will reduce you claim by 50%.

So we now understand why we need to get the Sum Insured correct, but what is the Market Value and how do we come up with it.

One Definition of Market Value is: an estimated amount for which an asset should exchange at the date of valuation between a willing buyer and a willing seller in an arm’s length transaction, after reasonable time and proper marketing, wherein both parties has acted knowledgeably, prudently and without compulsion.

A good way to estimate this Market Value is to compare your Bus with similar ones of the same age, type and condition as your bus that have sold or are currently offered for sale, excluding costs and charges for registration, compulsory third party insurance, stamp duty transfers and any dealer warranty costs.

Finding similar examples of your bus for sale or sold can be difficult, as buses are very unique. On what other vehicle can you specify the chassis, the Body, Air-conditioning, Seats, Desto Boards, Engine, Transmission, axles, accessories and anything else you can imagine.

A bus can be the ultimate “bitser”.

In the case that there are no other similar sales to compare with and you are unsure of the Market Value of your bus, this is when you need to seek help and advice. The obvious choice is a valuer, they will be able to provide a valuation based on the Market Value, or in the case of specialised vehicles they can calculate the depreciated value or use other methods to provide a value. Other avenues to consider include approaching the manufacturer of your bus, used bus sellers and even the internet.

An informed choice will always be better than a guess.

The last point to consider when providing your Sum Insured is your GST Status. Most commercial insurers will dictate that the Sum Insured is exclusive of GST. If you are not registered for GST or your Income Tax Credit (ITC) is not 100% for the vehicle to be insured, please contact BusInsure for specific advice.  

There are other factors to consider also, many commercial motor fleet insurance policies will have a “Replacement Vehicle” clause. This clause will specify usually that if your bus is less than 12 months old from new, in the event of a total loss, your bus will be replaced. This is all well and good, but the Sum Insured still needs to be considered and should be set at the replacement cost less GST (pending your ITC Status). After the first 12 months the Basis of Settlement will revert back to the Sum Insured or Market Value whichever is the lesser and the Sum Insured can be reviewed.     

In the Private Car market a fair few insurers will offer an “Agreed Value”.  An agreed value is a sum insured that is fixed by agreement between you and your insurer.  In the event of a claim being made as a result of your bus being declared a total loss, your insurance company will reimburse you the agreed amount. Agreed Value is available for buses also, but due to the nature of a bus and the variables involved, the insurers need a recent valuation to be able to offer Agreed Value (at the valuation amount). However if you do your homework and have a good understanding of the Market Value of your bus, the costs associated with obtaining a valuation may outweigh the benefit of having the Agreed Value cover, but its always a personal preference.

The used bus market is always fluctuating; it is worth taking a little time to ensure that your Sum Insured is adequate.

If you need any further assistance or would like to discuss this further, please do not hesitate to contact one of our helpful staff at BusInsure on 1800 BUSINSURE (1800 287 467) or click here to request a call back

Disclaimer: As always, the information above is general in nature and the terms, conditions and exclusions vary from insurer to insurer. We recommend that you take the time to read the insurer Product Disclosure Statement (PDS) to ensure that the policy is sufficient for your needs and requirements and that you understand the terms, conditions and exclusions of the policy. If you have any queries or need specific advice or help, please do not hesitate to contact us at BusInsure.

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