Guaranteed Replacement Cost (GRC) is one of our most popular coverages for our trailer products. Though not every trailer is eligible, owners of eligible trailers get the peace of mind knowing that they will be covered for the replacement cost of a new unit in case of a total loss.
We consulted with Shawn McKone, Senior Manager in Lifestyle Claims at Aviva, to provide an overview of what is covered, what isn’t covered, and what you need to know to correctly insure your customers.
1. What is Included in GRC
If a trailer qualifies for GRC coverage, there is obvious added protection for the unit, however there are some limitations on what is covered. For example, contents and detached private structures are not eligible for GRC and are subject to their own policy limits.
“GRC coverage is designed to provide a guarantee on the cost to replace the physical trailer itself. While GRC includes physical upgrades, options, and attached equipment that are purchased with the unit, there are many items that would not be covered by the policy. This includes extras like extended warranties, maintenance packages, or life insurance that are commonly sold by dealerships”, says McKone.
What about additions or structures attached to a stationary trailer that are not considered an upgrade or built in option?
“It is not uncommon for customers to hire a contractor to build an attached structure, like a deck or patio or even a full addition like a sunroom, to enjoy their trailer as a stationary seasonal property. These are not automatically included with GRC and are required to be specifically listed on the declaration page, via the “Attached Structures Endorsement,” to be eligible for coverage. We need to be clear on what the needs of the client are, so when it comes time for us to help them with a claim, we can provide them with the right coverage.”
We recommend a full review of the client’s needs when arranging coverage on the unit to ensure they fully understand what is covered and not covered in GRC, and there are no surprises if they suffer a loss.
2. Insuring the Unit to the Correct Value
GRC coverage contains a number of conditions that must be met in order for a customer to qualify for GRC if a claim occurs.
“Upon inception of the policy, one of the most important conditions to qualify for GRC coverage, is that the unit must have been insured to the full, current year cost to replace the unit with a brand new unit of similar kind and quality. This includes all taxes, upgrades and delivery fees, but does not include non-covered items like extended warranties”, says McKone.
If the unit is not insured to the current replacement cost when the policy was written, our customer could be ineligible for GRC, and settlement of their claim would be subject to a policy limit.
“We usually run into this situation when a trailer is purchased used. The bill of sale typically reflects the used market value, but not the current cost to replace the unit. If this value is used, instead of researching current year replacement cost, the unit is underinsured for GRC purposes, and the conditions have not been met”, says McKone.
When completing the application, ensure that the unit is adequately insured for what it would cost to replace today.
“We really don’t want to deliver bad news, as we know this impacts both our customers and brokers. Spending a few extra minutes, especially on used trailers, can really help us when a claim happens”, adds McKone.
3. Other Conditions
On top of making sure that you insure the unit to value, what other conditions do you need to be aware of?
“Another condition we must check for compliance occurs when an improvement exceeding $5,000 has been made after the policy was taken out. It’s important that a customer notify their broker if this happens so the values can be adjusted, and they remain insured correctly for GRC”, says McKone.
The last condition we would highlight is that the replacement unit must be of the same occupancy and constructed with similar quality.
“While it might seem obvious that the purpose of the policy is to put the insured back into the same position they were in prior to the loss, they cannot purchase any type of unit. It should be comparable to what they had before”, concludes McKone.
Aviva highly recommends care is taken to ensure units are adequately insured to avoid any problems at the time of a claim.
If you have any questions, please contact your Broker Operations Specialist or your Broker Relationship Manager.
