A client phones to tell you he has bought a high-end stereo system costing $5,000.00 which has just been installed in his car. What should you tell him?
A.
Provide you with a copy of the invoice so you can have his O.A.P. 1 Owner’s Policy endorsed to cover its full value.
B.
No further action is needed. The new system is automatically covered under O.A.P. 1 Owner’s Policy as part of the car.
C.
There is no coverage on the system unless the car is equipped with an approved security system.
D.
There is no coverage if the system is stolen unless the car has been forcibly opened.
The correct answer is A. because a high-value aftermarket stereo system is not something a broker should simply assume is fully protected under the standard auto policy without disclosure to the insurer. When expensive accessories or equipment are added to a vehicle, the broker should advise the client to provide documentation, such as the invoice, so the insurer can consider the added value and, where required, endorse the policy accordingly .
This is important because auto insurance is based on the vehicle and equipment as declared to the insurer. A significant aftermarket addition changes the value of the automobile and may affect underwriting, claims settlement, or the insurer’s willingness to cover the accessory in full. Properly notifying the insurer helps avoid disputes at claim time about whether the stereo was included, whether there are limits on custom equipment, and whether an endorsement or revised valuation is needed.
B. is not the best answer because a costly custom stereo should not be treated casually as automatically and fully covered without confirmation. C. is too absolute and introduces a requirement not generally stated that coverage only exists with an approved security system. D. is also too narrow and focuses on one theft scenario rather than the broker’s proper duty, which is to disclose the material addition and arrange the correct coverage.
Contribute your Thoughts:
Chosen Answer:
This is a voting comment (?). You can switch to a simple comment. It is better to Upvote an existing comment if you don't have anything to add.
Submit