Why you should check your amount covered at renewal time
When it comes to car insurance, something we always forget about is what to do at renewal time. Most of the time, it’s as simple as the click of a button to confirm you’re happy with your current premium and you’re wanting to continue your policy as is. However, it is really important to dig a little deeper and check your details on your policy at renewal. Perhaps most importantly, to check your amount covered when renewing.
What is amount covered?
Amount covered refers to the amount that your vehicle is currently insured for. This means that if you were to make a claim, the amount covered amount is the maximum that an insurer will pay for your vehicle. This includes if it is a total loss, or the cost to repair the vehicle is more than the amount covered. So, why is this important to check?
Reasons why you should check your amount covered
Your amount covered can be changed or altered based on how much you drive. This is because the condition of your vehicle will change as it ages and you put more kilometres on the clock. If you’ve noticed that you’re driving significantly less over the past year, it’s probably a good idea to check how this impacts your amount covered.
Market vs Agreed Value
In line with using your car less, another thing you should check is whether you chose Market or Agreed Value when you initially took out your policy. If you chose Agreed Value cover, this could be drastically different from what your car is worth now. This is especially important as we head into an interesting period for car values in Australia this year.
This interesting period has been attributed to two key factors: one, the impact of the global semiconductor shortage on the ability of car companies to manufacture new vehicles at the rate required to meet demand1, and two, the infamous ‘COVID Tax’. A term coined by consumers, which explains the increase in used car prices through the lack of availability of both new and used cars, difficulties surrounding importing, border closures and the inability for buyers to be able to travel to view potential buys.
All of these factors combine, alongside people saving money that would have otherwise been spent on things like travel and instead, being funnelled into car purchases, have allowed for the ‘perfect storm’ in terms of the used car economy becoming a seller’s market. As a result, the value of a variety of vehicles has increased exponentially in comparison to the usual depreciation of vehicles over time.
What does this mean for me?
Though these factors seem like they are short lived, it’s important for you to make sure you are comfortable with the price that your vehicle is insured for. In the event that something were to happen to your car, whereby your vehicle was seriously damaged or written off, we know that it’s important to you that you’re able to replace your vehicle. Whether you’re aiming for a like-for-like situation, or you’re aiming to upgrade if the worst happened, research shows that prices for most used cars have risen in 2021 and it’s expected that these will remain above market levels in previous years while new car shortages continue for the near term.2
The last thing you’d need on your plate after having lost your means for transport, is that you’re not able to purchase another car. So, whilst many used car values may rise and remain firm, we recommend that when your renewal comes through, you consult with your insurer to check, and if necessary, adjust the amount covered of your vehicle,3 even if it means your premium could be a little higher.
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1 Glass’s Information Services, 2021.
2 Glass’s Information Services, 2021.
3 Glass’s Information Services, 2021.
Australian Pensioners Insurance Agency Pty Ltd (Apia) ABN 14 099 650 996 AR 239591 is an authorised representative of AAI Limited ABN 48 005 297 807, the product issuer. Any advice has been prepared without taking into account your particular objectives, financial situation or needs, so you should consider whether it is appropriate for you before acting on it. Please read the relevant Product Disclosure Statement or Policy Document available at www.apia.com.au before you make any decision regarding this product. The Target Market Determination is also available. Information outlines current environment factors as at December 2021, and may not be indicative of future market influences.
The information is intended to be of general nature only. Subject to any rights you may have under any law, we do not accept any legal responsibility for any loss or damage, including loss of business or profits or any other indirect loss, incurred as a result of reliance upon the information. Please make your own enquiries.