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How Do Insurance Companies Determine Values?

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How Do Insurance Companies Determine Values?

Old 05-06-16, 12:49 PM
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How Do Insurance Companies Determine Values?

My RITCHEY (as listed below) was stolen a couple of months ago. Fortunately I have a full replacement value policy, so I worked up what it would cost for the same hardware 11 years later. They pay in 2 steps. The first part is the current depreciated value, which they paid. The second part = My Estimate - Our Policy Deductible - Their Depreciated Value.

Out of curiosity, I tried to get them to explain how they arrived at the Depreciated Value. After some vague non-explanation, I realized that I wasn't going to get an answer. So, the question to the group is does anyone know how insurance companies value and depreciate bikes? The best that I can figure is that they work it the same way as household goods, but that could be in error.

What do you think?
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Old 05-06-16, 01:39 PM
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My insurance replacement of a damaged bicycle was calculated based on an itemized shop quote that started with the frameset and each part with a corresponding retail price for each. The total lengthy list included installation labor and the final total was depreciated (a percentage for each year). My payout was almost the cost of a replacement bike. If I had not itemized each and every bolt, the final check would have been much less.
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Old 05-06-16, 01:55 PM
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Some POS stole my Atala Competizione in 1981. Like Secret Squirrel, when I made my claim, I detailed the parts - frame, each wheel (specifying hubs, rims, tubes, tires), crankset, saddle, BB & headset; I included labor for building the wheels). The bike cost about $180 in 1972; I bought it for $200 in 1980. IIRC, I collected about $350 from my insurance company, which, with my deductible would have allowed me to buy an equivalent new bike. (Instead of buying new, I found a better frame, used, and built up my new ride with a mix of new and used parts.)
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Old 05-06-16, 01:59 PM
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With how much insurance companies like to screw you over on cars, I'd assume they'd take the bike blue book value and subtract some arbitrary percentage after assuming "Fair" condition.

I'd actually like to know the answer for this as well. The thing is, if you itemize out a bike, it often costs much more than it'd be to buy the bike as a unit (especially at retail prices), so if the insurance company lets you itemize it, go for it!
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Old 05-06-16, 03:25 PM
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Originally Posted by Secret Squirrel
My insurance replacement of a damaged bicycle was calculated based on an itemized shop quote that started with the frameset and each part with a corresponding retail price for each.
Yes, that is exactly what I did, only I developed the prices from various internet sources (Competitive Cyclist, Colorado Cyclist, JensonUSA, etc. and the RITCHEY site). I documented prices and included all of the URL's for where each item was found. I did that because at the time I had not decided on who I wanted to build it for me. Ultimately I went back to the shop that built my 2005 BreakAway, GVHBikes in Oregon. In the final result, my estimate was $100-$200 higher, but rather that than the other way around. Basically I will only be out our deductible plus the difference to upgrade certain things beyond what I originally had (steel frame to carbon, for example).

Originally Posted by Secret Squirrel
The total lengthy list included installation labor and the final total was depreciated (a percentage for each year). My payout was almost the cost of a replacement bike. If I had not itemized each and every bolt, the final check would have been much less.
That's the heart of my question. There are bike pricing sites, but there isn't a lot of data on BreakAways as the population is pretty small. However, that doesn't cover the Campagnolo drivetrain parts. Seems to me that it comes down to just pulling a number out of the air. If I didn't have full replacement value, things would have stopped at the depreciated value. It just seems like a very inexact science where bikes are concerned.
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Old 05-06-16, 03:36 PM
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Originally Posted by corrado33
With how much insurance companies like to screw you over on cars, I'd assume they'd take the bike blue book value and subtract some arbitrary percentage after assuming "Fair" condition.

I'd actually like to know the answer for this as well. The thing is, if you itemize out a bike, it often costs much more than it'd be to buy the bike as a unit (especially at retail prices), so if the insurance company lets you itemize it, go for it!
That's how it worked out. The old and new bikes were custom builds, so any data that you might find wouldn't tell the whole story. RITCHEY basically sells the BreakAway as a frame and fork now, so anything you do will be a custom build. Back in 2004-05, they sold the steel frame and full carbon fork by itself or built up as a 9-spd Ultegra. I had ridden an aluminum GIANT with 9-spd 105 for a year and a half and didn't particularly like it. Campagnolo 10-spd was out by then. I took a chance and never looked back. The new bike also has 11-spd Chorus, albeit 2016 instead of 2011.
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Old 05-06-16, 04:24 PM
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I thought that replacement value covered the cost of the replacement, period!
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Old 05-06-16, 04:46 PM
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Minus the deductible, yes. It's just that for some reason my insurance makes 2 payments instead of 1. If it weren't for the fact that I upgraded some things, it would be:

Deductible + Depreciated Amount + 2nd Payment = My Total Estimate

My Total Estimate = Replacement Cost

The 2nd payment is done after the final documentation is submitted.

In round numbers, My Estimate or Replacement Cost was about $4300. The Deductible was $1500. The Depreciated Amount was about $900. The 2nd (and final) Payment should be about $1900.
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Old 05-06-16, 06:42 PM
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Originally Posted by Wanderer
I thought that replacement value covered the cost of the replacement, period!
It does. But certain items are not subject to it. Read the policy language or ask you agent. Never assume you are covered. It is best to schedule the items separately for agreed value not stated value. Agreed value means whatever you and the insurance company agree on is what the company will pay in the event of a total loss minus deductible. Stated value is the maximum the company will pay for a total loss. BUT if they can determine market value is less than Stated Value that is what you will get. Most companies schedule items on what they call an Inland Marine policy or rider on you homeowner's policy. If your bicycle is a rare vintage item by all means get it scheduled separately. Most scheduled items have a $0 deductible. Hope that helps. BTW, guess what I do for a living?
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Old 05-06-16, 07:52 PM
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As soon as you said "Stated Value"...
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Old 05-06-16, 10:05 PM
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Replacement cost insurance means initially theu pay you the replacement cost of the bike , -- minus age related depreciation and minus the deductible. When you actually replace the bike with an equivalent replacement, -- any depreciation with held is payable back to you

For instance

2005 Ritchey Breakaway ---- assume a replacement cost of $3500 with a nice kit ---
11 years of depreciation is deducted - basically getting it down to FMV -- so, say, --- $2000 value
Then the deductible is subtracted -- lets assume $500
Your net claim before depreciation is recovered is $1500 ---

Provided the item is replaced with an equivalent new item, -- you recover your $1500 depreciation on the tail end after providing documentation that you replaced the item

If it is an actual cash value policy for personal property and contents, -- you get paid $1500, and good luck
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Old 05-07-16, 06:57 AM
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I have a cousin who is my agent, and I thought I was buying replacement coverage - but come to think of it, it was insured for a stated set dollar amount. It really didn't cost very much more to do it this way.
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Old 05-07-16, 11:17 AM
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Originally Posted by DMC707
Replacement cost insurance means initially theu pay you the replacement cost of the bike , -- minus age related depreciation and minus the deductible. When you actually replace the bike with an equivalent replacement, -- any depreciation with held is payable back to you

For instance

2005 Ritchey Breakaway ---- assume a replacement cost of $3500 with a nice kit ---
11 years of depreciation is deducted - basically getting it down to FMV -- so, say, --- $2000 value
Then the deductible is subtracted -- lets assume $500
Your net claim before depreciation is recovered is $1500 ---

Provided the item is replaced with an equivalent new item, -- you recover your $1500 depreciation on the tail end after providing documentation that you replaced the item

If it is an actual cash value policy for personal property and contents, -- you get paid $1500, and good luck
I actually went through the appropriate numbers in message #8 ...

Originally Posted by Wanderer
I have a cousin who is my agent, and I thought I was buying replacement coverage - but come to think of it, it was insured for a stated set dollar amount. It really didn't cost very much more to do it this way.
Wouldn't it be necessary to reconsider those values and possibly adjust each year?
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Old 05-07-16, 12:57 PM
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It was for an additional 7 grand for add one to my motorcycle including the trailer I pulled with it. Honestly, it didn't cost much, and ended up to my benefit because of an accident.
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Old 05-07-16, 01:31 PM
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I would think that anything where the value is based on rarity and/or exclusivity has some fluctuation in apparent price. That would make it necessary to periodically adjust the Stated Value.
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