Early in the pandemic, car manufacturers and other technological industries severely cut back on their computer chip orders, fearing a global recession. In response to these actions, semiconductor manufacturers reduced chip production, which has led to an increase in demand. We’ve all witnessed the effects this has had on the automotive industry, such as skyrocketing vehicle prices and vehicle shortages. This shortage, combined with the woes incurred by the global supply chain, is having an impact on insurance. Let’s review how the chip shortage and supply chain are affecting auto policies.
Chip Shortages are Lengthening the Auto Repair Process
Replacement parts for vehicles are difficult to find, given both the chip shortage and global supply chain delays. Therefore, if you’re involved in an accident and need a part replacement, especially the semiconductor chip, the repair time is likely to be longer than normal. By extension, parts are becoming more expensive, meaning your claim will need to cover more. For this reason, it’s important to perform routine maintenance on your vehicle to prevent issues and report your claim and provide the required documentation as quickly as possible to start the repair process sooner.
Your Vehicle Can be Deemed Totaled for Less Damage Than Usual
The increased labor rates and rise in repair costs now make it far easier for the damage to your car to exceed its value. More vehicles than expected are being considered totaled, especially those whose semiconductor chips were damaged in an accident. Fortunately, comprehensive and collision coverage will help pay for the value of your car – minus the deductible. However, this may leave you in need of a replacement vehicle, which will likely be suffering from a steep price increase, or a rental, which comes with its own set of complications.
The Difficulties and Expense of Finding a Rental
If your car ends up in a repair shop, your auto insurance may cover a rental car while it’s being fixed. However, since fewer cars are being manufactured due to the chip shortage and supply chain delays, there are fewer cars available to rent. This, in turn, has increased the cost of rental vehicles. If your policy includes rental reimbursement coverage, it will cover some of the cost of a rental vehicle, but there are maximum coverage limits. With rental cars now being more expensive, that means you’ll be responsible for more money out of pocket.
How Can I Supplement my Current Auto Insurance?
Besides driving defensively and performing maintenance, you can purchase some endorsements to boost your protection. Here are two notable additions that can improve your coverage:
- Rental Reimbursement Coverage: Your auto policy may include this already, but if not, you can purchase rental reimbursement coverage as an endorsement and opt for a higher premium to obtain a higher limit on your rental.
- Purchase Price Guarantee Coverage: If you need to replace your vehicle, you’ll likely be buying at a far higher price point due to the lack of supply. However, with this endorsement, you will be compensated for the amount you paid for the vehicle if it’s totaled within two years.
While the chip shortages and supply chain delays will eventually pass, these are great endorsements to consider for the time being and even after these issues are resolved.
With the chip shortage and supply chain affecting auto policies, it’s a good reminder to review your current insurance. Finding gaps in your coverage can help you make investments that will protect you better. At TJ Woods Insurance, our agents can help pair you with the most suitable auto insurance for your needs and inform you of any endorsements that can help you through these supply disruptions and price hikes. If you’re in the market for better auto insurance, contact us today.
