Your car might be underinsured

Will you be able to replace your car with your insurance payout?

Reuben Van Niekerk
Consumer Advice
Pre-Owned Car
Used Car Values
Book Values

The recent COVID-19 pandemic and the global supply chain shortage, which followed, have played havoc with vehicle pricing. Due to increased demand and limited supply as well as the fact that many motorists are now driving less, and thus putting less mileage on their cars, used car prices have soared.

The knock on effect is that insurance values have in many cases not kept up with these inflated values and car owners experiencing a total loss, such as if their car is written off or stolen, could find their insurance pay out to be considerably less than the replacement cost of a similar car.

When determining the replacement value of a car, most insurance companies use what is called the book value, which is based on long-term trends. While this worked for many years, the recent global disruptions mean that the book value is now very often out of touch with reality.

While this is not the case for all models, the trend certainly affects popular models like the Toyota Hilux, Toyota Land Cruiser and Volkswagen Golf GTI.

Apart from supply and demand, a big influence on this pricing discrepancy is the mileage. Apart from a cars year model, the mileage has a significant effect on its price in the used market. With widespread work from home policies, the average yearly mileage dropped from between 15 000 and 20 000km to as low as 5 000km, which means that many cars are now more valuable in the used market and insurance companies are not all taking this into account.

Do your homework

It is a good idea to get in touch with your insurance company and find out for how much they actually value your car.

Then, by doing research, such as viewing pre-owned examples with the same mileage on websites such as you will be able to gauge what your car is selling for in the pre-owned market. If you find that the price at which your insurance values your car is vastly different to what pre-owned models are being advertised for, it is a good idea to get your car independently valuated.

This can be done by franchised dealers or specialised valuation companies. With this information in hand, your insurance company should be willing to adjust the replacement value of your car and restore peace of mind, knowing that should you suffer a total loss, you will be able to replace your car with something similar.