4x4 Insurance In An Overinflated Market
As I write this blog post in the pandemic period, here in Australia, the prices of pre-owned four wheel drives have exploded to insane levels. For example, prior to the pandemic a mate of mine purchased a 1995 Toyota Landcruiser 80 series diesel for A$12,000. It also included some useful accessories such a bull bar, snorkel, roof rack, two inch suspension lift and even a 12 litre centre console fridge. In contrast, a couple of weeks prior to writing this post a mate of a mate purchased a stock standard 1993 Nissan GQ (a very similar vehicle to the 80 series) for A$24,500. And it had a hundred thousand klicks more mileage than the 1995 80 series! Some of the pluses were, it had only one previous owner and full service history was available. Immaculately looked after. It had no tow bar, which meant no towing was ever done.
Looking through popular online sale platforms this is pretty much the current market price. How long the market will continue like this is anybody's guess.
Whilst I am not going to speculate on whether prices will ever come down, there is something else I would like to discuss. That is insurance.
Whilst prices for used four wheel drives may have sky rocketed, the values insurance companies are basing their covers on have remained pretty much the same as they were all along.
Using the example of the GQ, after shopping around, the best agreed value for insurance the owner managed to get was A$10,000. This already left a A$14,500 exposed risk in the hands of the owner. Start adding accessories (as we all do) and this exposure could easily increase by another A$5,000 at the least.
So, how do we manage this?
In this post I will share with you what I have done to try and mitigate this exposure. But I need to be very clear, I am not an insurance expert. Not even remotely. What I share in this article is how I have gone about trying to cover my investment.
Some sort of insurance is better than nothing. So the first thing I did was shop around for an insurance product which would give me a comprehensive cover at the lowest available premium. I must have made many phone calls and the frustration was every single insurance person I spoke to stuck to their available products only. The fact that I have a fully kitted out 4x4 and often travel remote made no difference to them. In some cases I even wondered if they knew what I was talking of. The best I could eventually find was $10,000 agreed value for my 1997 Landcruiser 80 series. That is around $6,000 less than the current market value for a stock standard 80 series from the same year. If I were to consider the replacement cost of all the accessories and other gear bolted onto the fourbie then the figure increases considerably.
So having no luck, I went with the cover for the agreed value of $10,000 and I managed to get an extra $3,000 on top to cover some of the accessories. This also gave me third party cover. The premium worked out to around $650pa.
Next was to try and cover as much of the exposed risk value as possible and also cover me in the event I got stranded in the middle on no where and needed recovery. The further remote one is the costlier a recovery can be. From what I have heard, this can range from $5,000 to as much as $25,000 here in Australia depending on how remote the recovery location is.
Since no insurance we going provide me with a solution for the above, I decided to go with a self managed fund, which hopefully I will never need. But having it in place was a peace of mind.
So here is how I went about doing this. Step 1 - I first got my self a credit card with a credit limit manageable to me. What I mean by "manageable" is, never ever over commit your self. Work with a limit affordable to you. Once I had got the card, I said to my self this card will only be used for an off-road travel emergency. It was not a credit card for daily use. In-fact I do not have a "daily use" credit card as I am not in favour of debt. That's just me. I have a friend who always says "work with other people's money."
Step 2 - every month a pre determined amount I credited into this credit card. A deposit in addition to the unused credit available in the card.
Over a period of time the funds (credit + deposits) available to me in the case of an emergency has grown to quite a sizeable amount.
So, by having an insurance cover in place along with my emergency fund, I have pretty much reduced the overall financial risk exposure by a considerable margin.
The up side is, the insurance cover premium I am paying is marginal, the self managed fund gives me peace of mind and down the track should I no longer require the fund, all I have to do is cash out the money I had put in and give the card back to the bank.
Now all I have to do is say a prayer every time I travel hoping I never have to cash the fund.
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