Following the recent devastating storms across Australia’s east coast, personal finance marketplace and advice company Compare Club is urging Australians to review their car insurance policies to ensure they’re properly covered.
Insurers received over 18,000 claims during the festive break period following the storms. With thousands of damaged cars needing to be repaired or replaced, Compare Club’s Head of Research Kate Browne warns that the knock on effect of the floods will affect car insurance premiums for all Australians as well as push up the price of the used car market and parts.
“Australians should prepare for the cost of vehicle ownership to increase. We’d expect to see car insurance premiums, as well as the price of both used and new cars, and vehicle parts, to rise,” she said.
“These devastating flood events are a reminder to all car owners to check your car insurance policy and research how much it would cost you to find an exact replacement for your vehicle.”
Knowing the true worth of your car is important because it impacts whether you have agreed or market value replacement in your cover. Picking the wrong type of replacement could leave vehicle owners thousands of dollars out of pocket- between $2,000 and $6,000 based on Compare Club data.
The data comes from a late 2022 Compare Club investigation which revealed that rising used car prices means that owners of popular vehicles such as the Hi-Lux could face a shortfall of up to $11,400 on a written off vehicle if they hold an agreed value policy.
The current challenge in the Australian car insurance market revolves around the shift in the value of used cars.
Agreed value policies, where insurers and drivers agree on a replacement value, have traditionally provided drivers more protection but are now more problematic. With used car prices on the rise, owners with agreed value policies may face significant disparities when insurers attempt to replace their vehicles.
Historically, agreed value was more expensive but offered a guaranteed insurance value in case of a write-off. In contrast, market value policies, which replace a vehicle at its current market value, could mean receiving less than the original purchase price due to depreciation. However, this has been flipped on its head due to the ongoing supply and demand challenges in the market.
“As we see more and more extreme natural disasters in Australia more frequently, it’s never been more important to know what you would be covered for if your vehicle needs to be written off,” said Kate Browne.
“While some vehicle manufacturers are less affected than others by supply chain issues, it’s worth checking. A simple search for your current make and model on a car sales site will give you an idea if your vehicle will cost more to replace than you originally paid for it.”
“We’re encouraging all Australians to review their general insurance policies. Making sure your policy is up to date could save you a lot of financial stress in the event of a write-off.”
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