Total Loss Replacement and RV Insurance

Sep 28, 2020 | Personal Insurance

RV Insurance 101

Total Loss Coverage will kick in once your recreational vehicle suffers total damage and the repair cost is higher than the RV itself. In other words, it is just not practical and unnecessary to repair it at all. Many might have difficulty differentiating the coverages of their RV insurance. At the same time, some are just not aware of its importance and what peace of mind it can give RV owners. Here is a thorough explanation of what you need to know regarding RV’s Total Loss Coverage, Total Loss Replacement, and also how you can get an RV Insurance quote.

What is Recreational Vehicle or Motor home Insurance?

First things first, insurance for your motorhome or recreational vehicle protects it whether it’s in storage or on the road. A complete coverage, like auto insurance, protects against everything:


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The Importance of Loss Coverage 

Others might think that having Collision and Comprehension coverage can already do all the work to cover RV damages. But to make it clear and differentiate them.

Collision Coverage

Collision Coverage is mainly for your RV’s protection from car accidents due to collisions. It may be with another vehicle, a non-motorized object, a tree, a mailbox, or signage. So let’s say you hit a car or a tree. That should be covered. Also, even when you are not at fault, that will be covered too. 

Comprehensive Coverage

Comprehensive Coverage, on the other hand, covers the repair of your RV caused by something other than a collision (except for a collision with an animal), e.g., theft, vandalism, falling trees, fire, hail, and natural disasters. These things can cause damage to your RV, but most can still be repaired.

If your RV got totaled, you must have Total Loss Coverage to replace your whole RV. For example, your RV was struck by lightning while you were camping, creating a fire that burned your whole RV to the ground. This scenario really happens, especially in open areas like camping sites. Now, if this unfortunate accident happens to your RV, your total loss coverage will be in charge.


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Understanding Total Loss Coverage for RVs

Understanding RV’s Total Loss Coverage is important for you to know what kind of loss coverage protection you need, especially if you are the type of owner who loves to travel.

Being on the road driving your RV all the time makes your proneness to accidents even more inevitable. We can never say when we can get unlucky, and an accident will happen, and if worse comes to worst, your RV becomes totaled. Here is where your RV’s insurance can be your only hope to save your investment.

Right now, the cost of RVs is comparable to houses and condos. It is something that you invested in with lots of hard work. Hence, being certain that your recreational vehicle is adequately insured is as important as your home and auto insurance decisions. But your insurance coverage will still depend on what kind of Total Loss Coverage you are paying. So it would really be best to get a good RV insurance quote.


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3 Types of Total Loss Coverage

Most insurance companies offer three types of Total Loss Coverage: The Actual Cash Value, Agreed Value, and Total Loss Replacement. The type of Total Loss Replacement will depend on how much you are willing to pay for your annual premiums. Also, if anything happens, how much you can pay upfront. 

Actual Cash Value Policy

It is the standard level of protection. Insurance companies offer this default type of policy for RVs mainly because it is the cheapest. But just because it is cheap still does not mean that your RV will lack protection. In any case, you need to file a claim because your RV was totaled; your insurance company will pay the RV’s current worth minus your deductibles.

So, for example, you bought your RV for $100,000. You make a claim after seven years. But your RV’s value has already depreciated to $60,000. Then your insurance company will pay you $60,000 for the current amount of your RV. The thing is, if you have an old RV that is already ten years old or more. Imagine how much it will cost today in the open market.

Being said, even if your insurance can pay the current amount of your old RV, can you still buy another RV with that amount of money? It’s likely that you cannot if you are eyeing to have a brand new one since RVs nowadays cost a total fortune. The average RV can cost between $10,000 to $300,000 depending on the features, style, and grandness. You can also talk to an insurance agent about getting a good RV insurance quote.

Agreed Value

It is the amount of money that the insurance company needs to pay you that you and your insurance company agreed upon. This agreement is all written in the document you signed when you purchased your insurance. However, “ Agreed Value “does not apply to all RVs. The qualifications are pretty strict. Your RV must be less than five years old. And if ever that passes and qualifies, the company’s underwriters will need to check the bill of sale to determine if they will approve your asking amount. 

Example:

Now, for example, your demanding amount costs much more than the actual amount they verified on your RV’s bill of sale. There is a big chance that you will need to go through an appraisal process. An appraisal usually happens when the insurance company needs to know how much your RV’s correct amount is. That is why it can only be determined using NADA guidelines or appraisal. Then once you have already agreed on a specific amount, that will be your “Agreed Amount” less your deductibles in case of a loss.

Better Coverage

Though the coverage of this policy sounds alluring, the thing here is the higher premiums that you need to pay. But come on! Who can have a better service that is above the average without paying extra? Moreover, it is very common now to have your RVs upgraded or customized. If you are one of those owners who make upgrades,  this coverage is best for you.

This is because the bus or custom RVs don’t have standard market value. So even though your RV costs less, it can still increase its value by upgrading it. But here is the catch, that upgrade may not have documentation or receipt included on your actual RV’s amount. Being said, No matter how much you upgraded your RV, if it’s not documented, it’s not going to count. In this situation, you need to talk to your insurer to make an investigation. NADA or Kelly Blue Book and appraisal will help you in finding the right amount for your RV. 


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Total Loss Replacement

The highest level of protection that many RV insurance companies offer is total loss replacement. If you choose to have this kind of coverage, depreciation will no longer be a problem. Because we are all aware that depreciation is the reason why expensive possession’s value went down over time, just like our RVs. And full loss coverage’s unique feature will give your RV exceptional security. It is where you just need to pay for your deductibles, then your insurance provider will replace your recreational vehicle with the same model.

Example:

You bought an RV for $70,000 this year. Then after three years, it got destroyed when you met with an accident. Your RV became totaled, and there is nothing you can do to save it. Here is where your insurance company will need to replace your RV with the same kind and model year or later. But what if your RV costs much more now? Still, the insurance company will replace it.

Purchase Price Guarantee Coverage

RV insurance companies offer total loss replacement coverage can only take effect for the first five years/model years. When your RV reaches its sixth year, the coverage will then be “Purchase Price Guarantee Coverage”. Most of the time, a motorhome or RV owner can only purchase this coverage in the first two years of your RV.


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