RV Insurance 101: Total Loss Coverage

Sep 28, 2020 | Personal Insurance

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

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 just to make it clear,  Collision Coverage is mainly for your RV’s protection to car accidents due to collision. It may be with another vehicle or even a non-motorized object or thing like a tree, mailbox, and 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, on the other hand, is a kind of coverage that covers the repair of your RV caused by something other than collision (except for collision with an animal). For example theft, vandalism, falling trees, fire, hail, and natural disaster. These things can cause damage to your RV but mostly can still repair. But 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 and it created 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.

Understanding RV’s Total Loss Coverage is important for you to know what kind of loss coverage protection that 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 really say when we can get unlucky and an accident will happen, and if worse comes to worst that your RV becomes totaled. Here is where your RV’s insurance can be your only hope to save your investment. The cost of RVs right now can technically be compared to houses and condos. It is something that you invested with lots of hard work. Hence, being certain that your recreational vehicle is properly insured is as important as your home and auto insurance decisions. But, the coverage of your insurance will still depend on what kind of Total Loss Coverage you are paying. 

In most insurance companies they 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 and if anything happens how much can you 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. If in any case that 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 already depreciated to $60,000. Then your insurance company will just 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 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 costs a total fortune. The average RVs can cost between $10,000 to $300,000 depending on the features, style, and grandness.  

Agreed Value – 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 “ is not applicable in all types of RVs. The qualifications are quite stiff. Your RV must be less than five years old. And if ever that it passes and qualifies, the company’s underwriters will need to check the bill of sale in order for them to determine if they will approve your asking amount or not. 

Now, for example, your demanding amount costs a lot more than the actual amount that they verified on your RV’s bill of sale. There is a big chance that you will have to make an appraisal process. It is just natural that the insurance company needs to make an investigation on how much your RV’s real 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. 

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 of your RV. 

Total Loss Replacement – This is the highest level of protection that many insurance companies offer. 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. 

Here is an 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.

 However, oftentimes this coverage can only be purchased in the first two years of your RV. And the total loss replacement coverage of your RV 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”. Meaning, in case you file a claim, the insurance company will only pay you the original purchase amount of your RV (minus the deductibles).

For instance, you bought your RV for $150,000 and you filed a claim after four years but the amount of your RV already depreciated to $70,000. But since it is still “within the five years period”, your insurance company will pay you a brand new and the same model of RV that you have. It does not matter if the current value of your RV depreciated or even increased, still, your insurer will replace it the same. So if in any case that your RV is now $160,000, the insurance company will still need to replace it. Now here is another thing, what if your RV now is no longer available on the market? In this case, the insurance company will replace it with an RV that has the same features and value. Sounds fair right?  

But, if you file a claim and your RV is already six years old which is passed the five years period; this is where the Purchase Price Guarantee Coverage will kick in. Your insurance company will pay you the purchase price of your RV. So you will receive an RV worth $150,000 the same amount when you bought it minus the deductibles. 

Recreational Vehicles aren’t exactly an inexpensive investment. Therefore, having the right insurance will surely come in handy when the time comes and Total Loss Coverage might just help lessen the expenses you could possibly meet regarding damages, coverage, and the likes. If you have any inquiries, you can contact us and we’ll help you get sorted out.