What The Chip Shortage Means For Your Car Insurance.
If you’ve looked at car prices lately, you might have noticed that new and used cars are both more expensive than they have been in recent years. In fact, the average sale price for a used car in America right now is just under $30,000. But it’s not just cars that have gotten expensive. With inflation on the rise, many of the goods we purchase regularly have gone up. While increases in the cost of milk or movie tickets might not be related, there is one shortage that is currently driving up prices across a wide variety of products, including automobiles.
Computer chips. Or more specifically, semiconductors.
Products of all kinds rely on chips to function, and with supply chain stoppages resulting in a serious lack of availability, many manufacturers simply cannot produce enough of their products to satisfy demand. This especially true of automakers. In 2021, US car manufacturing dropped off significantly, at some points even falling below the production numbers from the worst months of the 2008 financial crisis. While there have been some recent gains, the supply is still not enough to satisfy demand for vehicles, which has led to increased prices on used cars.
What does any of this have to do with your insurance?
Well, nothing, directly. But it does mean that market conditions may have changed since you got your policy enough that its worth taking a second look at your coverages. Do you know if you have rental car coverage, and if so, do you know how much it covers per day? Rental cars are more expensive now too, since the rental car companies just can’t get enough cars to maintain their fleets currently. If you don’t have rental reimbursement on your policy, you might be stuck paying out of pocket for a month while you wait on your car to get fixed. Supply chain and labor shortage issues have impacted your wait time at the body shop now too, meaning you’ll likely be in that rental for longer. Your rental bill could easily exceed $1000 in this scenario.
What about comprehensive and collision coverage on your auto policy? Maybe you recently paid off a car and decided to save some money by dropping those coverages and are carrying liability only. If you get into a wreck, will you be able to afford to replace that vehicle in this market? Even if you do have comprehensive and collision, what about underinsured motorist? The minimum liability coverage requirements in South Carolina for property damage are $25,000. This is less than the average price of a used car right now, and could be substantially less than your car would cost to replace. If someone with minimum coverage hits you, having underinsured motorist coverage on your policy would help you make up the difference without having to file a claim against the collision part of your policy, which can lead to a rate increase, even if the wreck wasn’t your fault.
Of course, the impacts of supply chain shortages are not limited to just the automobile market, as anyone who has tried to buy a video game console lately can tell you. Computers, TVs, household appliances, and many more products rely on semiconductors, and all of these products have seen price increases. Now is a great time to review your coverage on your homeowners or renter’s policy as well and see how much contents coverage you have, and if you have actual cash value or replacement cost. If you’re not sure what you have or what these terms mean, talking to you local insurance agent is a good idea. It never hurts to spend a few minutes reviewing your existing coverage to make sure you have what you need.