The global semiconductor shortage has negatively impacted the availability of new cars, with demand for used cars skyrocketing as a result.
This has led to a rise in the prices of second-hand cars, which may have an effect on your car insurance, according to Old Mutual Insure.
“Today’s rocketing car market may pose a problem for your car insurance coverage in the event you have a major accident, your car is stolen, or your vehicle is damaged,” said Lizo Mnguni, spokesperson for Old Mutual Insure, as reported by BusinessTech.
“Worse, you could be underinsured, and possibly thousands of rand out of pocket.”
Mnguni said new-car buyers of today are not willing to be on the end of a long waitlist for a car and are opting to go for 2019 or 2020-model-year vehicles instead.
“Demand for new vehicles is now being diverted to pre-owned vehicles. Used cars manufactured in 2020 and 2019 have benefitted the most, experiencing an annualised increase in their trade values of about 1.5%,” he said.
Additionally, he said Old Mutual has noticed that car depreciation is lower than usual – while global supply chain problems have negatively impacted the availability of second-hand parts, too.
Mnguni said that, as in the case of Old Mutual, your insurance provider will “automatically adjust your vehicle premium at your policy’s renewal using your vehicle’s latest price information”.
“However, given the rising prices of the second-hand car market, some policyholders must be aware that they may actually experience a larger increase in their premium at renewal stage, rather than a decrease, as their vehicle may actually be worth more than what they initially insured it for, or bought it for, given that there has been minimal car depreciation.”
Mnguni said insurers calculate your premium by taking into account the total loss in the event that you have an accident or damage your vehicle.
“Fender benders and bumper damage can be costly to repair,” he said.
In addition to soaring second-hand car prices, expensive parts, and low depreciation, scarcity can also impact your car insurance premium.
“The onus is on the policyholder to speak to their insurer to ensure that the sum that the vehicle is insured for is accurate. Failing which, you may be in for nasty surprises like finding out you are underinsured, if you get into an accident.”
“We urge drivers to look at the specifics of their car and engage with their insurance policy. If in doubt whether or not you may be out of pocket at claims stage, speak to your insurance provider or broker before the unfortunate happens,” said Mnguni.