Have you seen the car market as of late? If so, you’re probably finding out very quickly that used cars are worth significantly more today. Why is that and what does it mean to you, even if you’re not planning on selling? Let me explain!

With the limited production and availability of new vehicles, private sellers and dealerships are searching for more used vehicles to supplement their inventories. As the demand for used vehicles grows and supply dwindles, the price of the available used cars continues to rise. This impacts your car insurance.

Insurance Implications of the Current Used Car Market

Even if you’re not looking to buy or sell a car, the current market means it’s time to review your insurance policy to confirm if your auto policy has the right coverages in place, and there is a big (pricey) reason why.

For example: You may have taken the physical damage coverage off of your 2009 Honda Civic a few years ago because you thought the car had little to no value. If you were in an accident and the vehicle was totaled today, it could cost more than $10,000 to replace that vehicle. Yikes! See what I mean? It’s a great time to reach out to your insurance agent to get this coverage added back on.

Another typical insurance coverage to add on to an auto policy is rental reimbursement. This allows you to rent a vehicle if your car is in an accident. Typically, this allows you $30-$40 per day to rent a vehicle. The cost of rental vehicles has also risen, and this might not be enough to get you a vehicle — or it may put you in a significantly smaller vehicle than you are used to.

Types of Auto Insurance Coverages

Auto coverages can be written in two different ways.

Actual Cash Value

This is the most common way an auto is insured on an auto policy. If your vehicle is totaled, then the insurance company will calculate the replacement cost of your vehicle minus deprecation.

Agreed Value

The alternate way is to have agreed value on the auto policy. This states a number on the policy, and if your car is totaled, then you will receive that amount minus the deductible. Each year, this agreed value will fluctuate. We have seen this number going up on used vehicles vs. the typical decreased value. So, again, it’s incredibly important to know what your vehicle is worth now and insure it based upon that.

If you’re not buying or selling a car, it may seem odd to be worrying about why used cars cost so much, but when it comes to insurance, knowing the value of the market is crucial.

If you have any questions on this or want to review your policy, please don’t hesitate to reach out!