How Global Supply Chain Issues Could Result in You Being Underinsured
Posted by Forest Insurance on
With supply chain delays impacting home and auto prices as well as repair costs and timelines, insureds should talk to their agent about reassessing the limits on their insurance policies. Otherwise, they may find themselves grossly underinsured come claim time.
Missing Parts, Repair Delays, and Inadequate Insurance Coverage
Despite the global economy slowly starting to emerge from the Covid-19 pandemic, the pandemic’s destructive impact to the global supply chain continues to be felt. While most of the population was on lockdown, demand, as well as industrial activity, was reduced. As lockdowns lifted, demand increased, resulting in today’s supply shortage. The lack of raw materials, key components, worker shortages, and bottlenecks at the shipping and transportation fronts are all factors in the supply chain slowdown.
Home Repair Delays
Supply chain shortages have had a huge impact on homeowners—with some waiting months for repairs, scrambling to find contractors, and paying subsequently inflated rates for materials and labor. Material shortages have forced contractors to find workarounds—from pivoting to alternate materials to completing construction jobs out of sequence while they wait for materials to come in. The upside for homeowners is that home values have increased (though they may now be underinsured).
Car Repair and Rental Woes
Supply chain woes have likewise impacted automakers, repair shops, and rental car companies. A global semiconductor chip shortage has impacted the availability of new cars, leading to a surge in both the demand and price of used cars. This shortage has had a direct impact on the supply and availability of rental vehicles. Rental companies, which sold off their fleets during the pandemic when worldwide travel declined, are now struggling to replenish their fleets. And with fewer vehicles available, the daily car rental rates have skyrocketed. The supply chain problem has also impacted repair shops’ ability to repair vehicles which has resulted in increased repair time and thus longer vehicle rental periods.
The lack of availability of rental vehicles and parts delays have both contributed to higher rental costs for policyholders, whether it be the cost per day or the number of days a rental is needed. Repairs that would normally be completed within the purchased Transportation Expense coverage limits are now regularly exceeding those limits. As a result, policyholders are incurring more out-of-pocket rental expenses than ever before.
Lessening the Impact
One way to maximize rental coverage is for a policyholder to make sure the shop has the necessary parts before taking a vehicle in for repairs. This may avoid any concern with parts delays.
Another option—likely the best option—is to increase the Transportation Expense limit. Increasing the limit is a sure way to combat the increased daily costs and possibly extend coverage beyond 30 days when combined with renting a vehicle at a rate below the daily limit.
The Bottom Line
With supply chain delays impacting home and auto prices as well as repair costs and timelines, insureds should talk to their agent about reassessing the limits on their insurance policies. Otherwise, they may find themselves grossly underinsured come claim time.
We welcome your insurance-related questions. Contact the independent insurance agents at Forest Insurance at 708-383-9000, email us at info@forestinsurance.com, or visit us at www.forestinsured.com to learn more about the best fit coverage for your home, auto, life, and business.
