Many insurers today offer customers the option to boost coverage for an additional fee by issuing updated comprehensive policies. This offer also extends to insured vehicles on credit or lease plans, a shift that did not exist just a short time ago.
The principle behind this is straightforward for insurers. Hull insurance reflects the car’s value at the time the policy was purchased, and payouts in the event of a claim are based on that price.
In March, car prices rose by 20 to 30 percent and the cost of many components nearly doubled. As a result, a hull policy bought in February or even early March 2022 may not fully cover actual repair costs. If only minor damage is compensated, repairs after a major accident may be uneconomical for the insurer to complete.
Tatyana Vilchevskaya, head of advertising and marketing at Energogarant, notes this shift in market dynamics and how it affects policy value.
Expert Commentary
Car owners who previously insured vehicles for amounts that seemed sufficient can be surprised by the new economics after an accident. Repair cost assessments now account for higher component prices and labor costs. If the replacement value of repairs exceeds about 70 percent of the insured amount, the insurer may declare a total loss for the vehicle. The practical takeaway is clear: extending insurance to reflect the current true value of the car becomes a practical protection strategy.
Is Total Loss Beneficial?
When a car is deemed a constructive total loss, the owner may receive the full insured amount and the remaining usable parts may be transferred to the insurer. In some cases the insurer may take the remaining assets, which reduces the insured amount accordingly. Neither outcome fully compensates for the financial impact of the loss.
In cases of theft, it is crucial to maintain comprehensive coverage aligned with the car’s present market value. Otherwise, the payout may fall short of what is needed to replace the vehicle.
Are Insurance Prices Rising?
Since early March, spurred by currency instability and increasing parts and repair costs, the average price of comprehensive insurance has climbed by 15 to 20 percent. Many insurers warn this trend could continue as costs keep rising.
Yet demand for comprehensive coverage has grown. Energogarant reports a 16 percent rise in insured cars in March 2022 compared with February, as owners seek protection against theft and major repair costs. Many buyers feel they cannot afford a new car and turn to enhanced coverage to secure peace of mind.
Practical steps for car owners include the following, as advised by insurers:
- Be cautious and follow traffic laws to reduce accident risk.
- Store vehicles in secure locations and garages.
- Compare insurer offers because thresholds for declaring a total loss vary; some set damage at 75 percent of insured value, others at 70, 65, or even 60 percent.
- Review the insured amount and renegotiate to reflect current market prices so that theft or constructive loss yields appropriate compensation.
- If a tight budget is needed, opt for deductible-based coverage. This approach lowers comprehensive premiums while still providing protection in an accident or theft. Many insurers also offer payment plans that spread the cost over four installments.
- If a claim is disputed, legal avenues remain possible to challenge insurer decisions and repair cost assessments, with final judgments legally binding on both sides.
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