How the Vehicle Shortage Impacts Your Insurance Rates

Updated June 16, 2022
car lot during a vehicle shortage

We’ve all felt the massive impact of the COVID-19 pandemic, and if you’re in the market for a new car, you’re certainly feeling it now. Auto manufacturers have reduced auto production globally due to a shortage of semiconductor chips, and in some cases, production has come to a complete stop. That means many modern technological features that you’ve come to depend on in your vehicles will no longer exist, such as touchscreens, automatic braking, and lane change detection.

Making semiconductor chips is a tedious and time-consuming process which can take up to six months to complete. With that in mind, you can expect to feel the immediate impact for quite some time. Expect to pay significantly more than the manufacturer-suggested retail price for your new car, which ultimately drives up the costs to insure your vehicle.

Although there is no sign that the cost of new cars will be decreasing anytime soon, you may have also noticed the price of used cars are going up. Used cars are in such high demand that they can cost you just as much, if not more, than a brand new car.

That’s because the steep discounts on the manufacturer’s suggested retail prices that made purchasing a new car more affordable are much harder to come by.

Auto Repairs Are More Expensive Due to Chip Shortage

There’s never a good time to be involved in an auto accident or need repairs. However, you can expect to pay more for repairs with the global supply chain issues and semiconductor chip shortage, even for relatively minor issues. 

Auto shops also take longer to complete repairs because receiving the parts they need to fix your car takes longer. As a result, your vehicle spends more days in the repair shop and you need more days in a rental car. Suppose your insurance is reimbursing your rental car expenses or paying them outright. Eventually, these costs are passed to you, the consumer, increasing your insurance rates.

If purchasing a new car isn’t an absolute necessity, now might be a good time to hold off. Instead, take an assessment of your current vehicle and decide what you can do to make driving it safer and more reliable. Now more than ever, it’s crucial that you keep up with your vehicle’s maintenance schedule by changing your oil and rotating tires when needed. Also, opt for public transportation or ride-sharing opportunities to decrease the wear and tear on your car if possible. Driving less also reduces the likelihood of being involved in an accident.

Vehicles Are Deemed a Total Loss With Less Damage

You may also feel the effects of the global supply chain and chip crisis if you are involved in a vehicle accident and your car is deemed a total loss. A total loss means the cost to repair your vehicle is more than it’s worth. With the crisis, that may also mean the parts needed to repair your vehicle are just not available.

If you’re involved in an accident, file a claim with your auto insurance provider as soon as possible so your claim can be assigned to an adjuster. The adjuster will arrange for your vehicle to be towed to a repair shop or they may come to your home if that’s where the vehicle is located.

At the time, the adjuster will assess the damages to the vehicle and oftentimes can make a determination on the spot as to whether your vehicle is repairable or totaled.

If your car is new and you have new car replacement coverage, the insurance adjuster will write a check for the amount needed to purchase a brand new car just like the one you had. With the shortage, this may or may not be possible because some new car manufacturers are not able to include the same features on new cars as they did before the shortage. 

If your vehicle is older, the insurance adjuster will pay your car’s actual cash value (ACV) minus your deductible. The check will be paid directly to you if you own your vehicle outright. If you are leasing or have a loan on your car, the check will be paid directly to the bank or finance company.

New Cars Have Fewer Features Due to the Chip Shortage

Without the supplies and chips needed to include certain features in new cars, they have no choice but to leave them out. Some new vehicles are now manufactured without safety features such as driving assistance, automatic braking, and lane change alerts. 

When insurance companies give you a quote for car insurance, they consider the year and the make and model of your car. They believe in the safety features of your vehicle and often provide discounts to drivers who own cars they deem safer. Without these components, your chances of being involved in an accident are higher, impacting how much more you pay in insurance premiums. 

Comparing insurance quotes to get the best and most affordable insurance to meet your specific needs would be best.

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Increase in Non-Owner Car Insurance 

Expect to see an increase in auto insurance rates for drivers with valid driver’s licenses who do not own or lease a vehicle or live in a household with a person who does. This liability auto insurance coverage will protect you if you’re involved in an accident while driving someone else’s vehicle, including rental cars. 

If you’re involved in an accident that’s your fault, the liability car insurance will pay for injuries the other person obtained or damages to property you caused.

  • Bodily Injury Liability Coverage. Covers the injured person’s medical expenses, including ambulance fees, hospital bills, and prescriptions.
  • Property Damage Liability Coverage. Covers the injured person’s car repair bills, including having the vehicle towed to a repair shop, parts, and labor, 

Non-owner’s liability insurance policies are usually less expensive than insurance for drivers who own or lease their cars. Most auto insurance companies offer these policies, and getting a quote is relatively easy but be sure to compare quotes for the cheapest car insurance premiums available.

Choosing a policy that works within your budget is much better than taking a chance and having an accident without this added protection. Most states set required coverage limits meaning you must secure a certain amount of insurance. 

How to Find the Cheapest Car Insurance During the Chip Shortage

While we’re navigating this chip shortage, you may see an increase in your auto insurance rate, but thankfully you still have ways to keep your insurance low. 

The best thing you can do is compare auto insurance rates. All insurance companies use a variety of factors to determine your rate, such as your age, location, marital status, vehicle age and more. But, if you get insurance quotes from 10 different companies you’ll likely see 10 different prices. That’s because they look at these factors differently. 

So, be sure to get quotes from several car insurance companies to see where you can find the most affordable rate without sacrificing quality coverage.

Our auto insurance comparison tool makes this process easy. Simply enter some information about yourself, your vehicle and your insurance needs and we’ll compare rates of 65+ auto insurance companies to find you the cheapest rates on the market. 

On average we help drivers save $720/year, which we could all benefit from today. To get started just enter your zip code below.

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Frequently Asked Questions

Should I adjust my current insurance policies? 

If your car is financed by a bank or loan company, consider adding “gap coverage.” Gap coverage will pay the difference between the current value of your vehicle and the cost to repair it.

Gap policies are relatively inexpensive and can save you thousands of dollars if your vehicle is lost or stolen. Look at rates for gap insurance rates based on your vehicle’s make and model.

Why is my car insurance rate increasing?

There are many reasons your insurance may be increasing. Your rate is based on your driving history, credit score, and make and model of your vehicle. If you’ve filed an insurance claim recently, that may also be a factor. Parts and labor for auto repairs are more expensive, primarily due to supply chain disruptions.

How can I find the best price on car Insurance? can help you compare car insurance rates with multiple insurance companies in one convenient place. The process is free and only takes a few minutes. Get started here to make sure you don’t overpay for car insurance.

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