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Supply Chain Problems & Chip Shortage - How does it Impact Insurance Payouts?
November 11, 2021
Inflation? Supply Chain Problems? Chip Shortage? How does it Impact Insurance Payouts?
By now you’ve likely realized that the cost of everything is going up! U.S. supply chain problems and computer chip shortages put pressure on the availability and pricing of vehicles and housing materials.
The overall inflation rate reported by the US Labor Department only shows an annualized rate of change at 5.4%. However, other essential segments have seen much higher rates of increase, including new vehicles and building material costs.
Car Prices and Costs:
Supply chains and a Computer Chip Shortage for vehicles have resulted in a lack of new cars and catapulted the value of used cars by 20 to 30% year over year ! Prices have skyrocketed.
Drive by your favorite car dealership, and you’ll also see that inventory levels are at an all-time low.
Impact on Your Car Insurance:
The good news is that your car insurance policy must respond to the changes in the value of new and used vehicles. Another important note is that Comprehensive and Collision coverages typically do not come with a stated maximum limit.
Most auto policies pay for the
Actual Cash Value of vehicles
. So as vehicle values change -- in this case, going UP , so does the payout in the event you have a claim. In other words, auto comprehensive and collision settlements will reflect the increased costs.
Home Building Materials Prices:
As of September 2021,
the Producer Price Index for construction materials is up 23% over the last 18 months.
The cost to rebuild a home has seen significant cost pressure.
However, many homeowners’ policies (especially in our rural area) are not written with Replacement Cost Settlement provisions. Alternative loss settlement options are popular and may be based on Actual Cash Value (replacement cost minus depreciation) or Repair Cost (cost reflecting commonly used building materials).
The chart below outlines some of the different Loss Settlement Options available on homeowners insurance policies in New York:
With all the economic changes in the last year, we wanted to invite you to review your policies. Give us a call to review and discuss your homeowners’ insurance program. There may not have EVER been a better time to do that … than right now.
This article may have been originally published at Quora.com.
To see Jeff's Quora.com profile click here.
“Am I covered if I drive someone else’s car?” Or, “Am I covered if someone else drives mine?”
Many don’t realize that the insurance industry is one of the country's most regulated business segments, especially in New York State. The New York State Department of Financial Services (NYS DFS) wields significant control over the insurance business and has a stated goal of protecting consumers.
Most property insurance companies offer Actual Cash Value or Replacement Cost settlement options. Typically, insurance companies will require that you insure the property to the settlement value you choose. If you select Actual Cash Value, the amount you may be required to insure the property for will be less than the corresponding Replacement Value.
In that spirit, the Ryan Agency is sponsoring a Stearns BBQ Dinner pickup at our office on 57 Broadway Mall in Hornell on September 12th from 3:00 PM to 4:30 PM.
Today, an individual’s credit history can play a more significant role than any one of those traditional factors. Good Credit Scores lead to a Positive Insurance score. A good Insurance Score greatly influences what someone will pay to insure their vehicles.
Insurance companies offer various discounts for which their policyholders may qualify.
Great Eight number Six (6) suggests taking a look at removing Comprehensive and Collision on Older Vehicles.
By reducing the number of claims in your insurance history, you can significantly affect your rates in the future.
Sometimes, this concept meets with resistance from policyholders. The thought of paying more in the event of a claim is off-putting to some. Even if that means I pay more for my insurance.
OK. Admittedly, this strategy doesn't benefit everyone, but it can be very beneficial for those it does. You may have unique home or auto insurance needs that prevent you from bundling with the same company. Alternatively… you might have a better rate without the bundle discount by splitting up your insurance between multiple carriers.
