Getting in a car crash just months after you bought a brand new car is the worst possible scenario, but it can happen. A collision or your property being stolen, are situations no one can anticipate. Luckily, you can protect yourself with the right insurance policy. In this article, we will break down the new car replacement insurance. Plus, answer the main question most people have in this regard: Is car replacement insurance worth it?
The first thing you should know about car replacement insurance is that this coverage only applies to new vehicles. Some insurance companies can extend the protection up to five years, but it typically lasts for two. Further, this only applies to vehicles that you purchase. For leased ones, there are other types of insurance policies. If you have questions about this coverage, visit Surex website.
Since this insurance policy is only available for some drivers, you might be wondering if car replacement insurance is worth it. To help you make a decision, here is an example. Imagine you have saved for months to pay the deductible, dealer’s fees and insurance of your new car. Then, one day you park your car while visiting a friend and when you are leaving, you notice your it has been stolen. If you have insurance, your provider will give reimburse the depreciated value of your car. That means if you want to purchase another vehicle, you will need to pay thousands of dollars to fill the price gap.
In the situation above, you will only be losing money because you will have to pay for the replacement. However, if you are still unsure whether purchasing car replacement insurance is worth it. Below, we will explain to you how it works and compare it to other insurance policies.
Car Replacement Insurance: How it works
After you purchase the car replacement insurance, it will only protect you in case your car is declared a total loss. This means when your vehicle is involved in a collision and the damages are close to, or exceed the cost of your vehicle. Also, if your car was stolen it can be certified as a total loss.
Then, the insurance company will proceed to reimburse you the value for a new car, of the same model and make, like the one before. In other words, you will recover all the money you spend on your first car, to buy a replacement. The only thing that the car replacement insurance doesn’t cover is the deductible.
When you want to get money from this insurance policy after an unfortunate accident, there are some conditions you need to meet.
Age and Mileage
As we explained before, the car replacement policy is only applicable to new cars. This means your vehicle should have less than two years or 15,000 miles on the odometer. The age and mileage condition can change depending on your insurance company.
Collision and Comprehensive insurance
Most of the time these two insurances come in a package, and you can add on the new car replacement insurance. Both policies combined will protect you in case you hit another car or if your property gets damaged by other factors. The collision and comprehensive insurance are also one of the main conditions to get a reimbursement from the car replacement policy.
Deductible
As we explained above, the new car replacement insurance will give you back enough money to buy a brand new car. However, you still have to cover the deductible. Remember this amount you will have to pay out of your pocket. That’s why it is important to always have an emergency fund.
Purchase time
Because the car insurance replacement policy is only available for a limited amount of people, it also has a time frame. If you want to purchase this policy, some insurance companies offer up to six months after you buy your car. Others can allow you to acquire it any time before the accident.
Now that we know everything about how car replacement insurance works. We are going to compare it to other policies you can acquire.
New Car Replacement Insurance – A policy comparison
Collision Insurance
The collision insurance will cover all the costs for the damages when you hit another car or an object. With this policy, the insurance company will reimburse you the value of your car minus the deductible. However, they will give you back the actual cash value (ACV). This means that they will give you the depreciated value.
The main difference between collision insurance vs car replacement is the amount you will receive. The collision insurance will offer you thousands of dollars less compared to the new car replacement policy.
Better car replacement
This policy is very similar to the car replacement option, but the compensation is slightly different. When you purchase the better car replacement coverage, the insurance company will give you back the money for a newer model. The car replacement will only reimburse you the value for the same model you had.
The reason why a significant amount of people choose the better car replacement, is that it applies to all vehicles. You don’t have to meet the mileage and age condition, plus you will be protected. The only downside of this policy is that there are limited insurance companies that offer it.
Gap Insurance
Many people get confused when comparing gap insurance vs the new car replacement policy. But, is easy to understand. Gap insurance helps you pay for the older car while the replacement is to acquire a new one. That’s why the people who choose gap insurance, often have cars on lease or a loan.
Is car replacement insurance worth it?
Keep in mind that paying for car replacement insurance will only add $120 extra to your bills yearly. In return, you will have peace of mind, and you won’t have to worry about what would happen if an accident occurred. Even though we strongly recommend purchasing the replacement policy if you have a brand new car, the decision is yours. Compared different quotes, determine the budget you have, and then you will have the answer.
Factors That Impact the Cost of New Car Replacement
Company
Depending on the company, purchasing insurance along with a new automobile replacement may incur an additional fee. However, some businesses provide it without charging extra. Compare prices from various insurers to see which is the best choice for you.
Purchase price
Your insurance rate will be influenced by how much your automobile is worth. Having a higher value car may end up costing you more because new car replacement insurance covers the entire cost of your vehicle. However, if you drive a costly vehicle, this coverage might also be beneficial.
Location
Your insurance costs are significantly influenced by where you live as well. This is due to variations in location-specific elements including incidences of auto theft, data on auto accidents, and hazardous intersections.
Driver
The kind of driver you are also has an impact on your chance of getting into an accident. Teen drivers typically have higher insurance prices than middle-aged drivers because they are viewed as being more dangerous. If you have a history of traffic offenses, your insurance rates can also increase.
Where Can You Get Car Replacement Insurance?
You can purchase coverage from a variety of providers, including dealerships, direct providers, and some major insurance companies. In places like Alberta and British Columbia, replacement coverage is generally accessible. ICBC replacement insurance is offered in British Columbia, however it is frequently significantly more expensive than policies from independent insurers.
Dealerships often only provide coverage when a brand-new car is sold. They add a commission markup for the sale. Although it could appear practical, you’re just spending too much.
Up to five years old automobiles are eligible for coverage from direct suppliers. A variety of add-ons that might assist you with deductibles or lowered worth are frequently included. The finest price and coverage alternatives are frequently offered by direct providers.
It could be provided by your main insurance company for low-mileage vehicles that are new to three years old. Once more, an endorsement is not the same as full replacement cost insurance. The price can be on par with that of other speciality providers. The cost of ICBC replacement insurance varies.
Are You Eligible For New Car Replacement Insurance?
That is a wise question! Your residence and the kind of car you drive will determine your eligibility, which varies from provider to provider. Other considerations include the vehicle’s age and mileage. Actual cash value (ACV) and replacement cost have a growing discrepancy over time. Because of this, insurers place a time limit on how long they’ll cover your brand-new vehicle. Using a car for business purposes, ride-sharing, or for travel of more than 40,000 km annually is likewise prohibited.
It’s wise to constantly confirm eligibility with a particular supplier. To be eligible, you must also have collision and comprehensive insurance.
Difference Between New Car Replacement And Gap Insurance
Similar principles govern gap insurance and new car replacement insurance. Imagine if your brand-new car was hurt in a collision. The difference between what you owe and the car’s real cash worth will be covered by gap insurance.
If your automobile cost $30,000 and you got into an accident, the lender will still want $26,000 from you. However, your insurance company could only be ready to buy your car from you for $21,000. That implies the lender will still receive $5,000 from you. This gap is filled by gap coverage.
Most lenders demand that drivers buy gap insurance. Consequently, if you lease or finance your car, it might be covered by your auto insurance policy.
Make sure you have enough cash on hand to pay the lender back if your car is totaled if you don’t have either type of coverage.
Difference Between New Car Replacement And Better Car Replacement Insurance
Better car replacement insurance is only offered by a select few insurers. It is provided as newer car replacement coverage by some insurers. Both newer autos and older cars are eligible for this kind of coverage. If you have this kind of auto insurance, a total loss claim will result in a better settlement.
Choosing New Car Replacement
As you put more kilometers on a car, its value decreases or depreciates. The quicker your car depreciates after you drive it off the lot, the newer and more expensive it is. That implies your insurance provider will only pay your car’s true cash value if you total it during the first few months of purchase, which is unlikely to cover the price of a comparable new vehicle. Some businesses go so far as to offer new automobile replacement insurance that covers the most recent model year of the same vehicle rather than the one you previously owned.
New Car Replacement Policies
New car replacement coverage is an option provided by these insurance companies:
- If you total your automobile within one model year and before you’ve covered 15,000 miles, Liberty Mutual will pay for the cost of a new car. For clients who drive older cars, the firm also offers a “Better Car Replacement” program.
- In the event that you total your car within five years, Travelers Insurance will pay for the cost of your new car. Only accidents are covered by this policy; floods, theft, and fire are not. The company now offers a “Premier Car Replacement” policy that combines new car replacement, gap coverage, and glass deductible coverage for claims involving windows and windshields that are more reasonably priced.
- The Hartford will replace your vehicle with a brand-new one if it is totaled within 15 months or 15,000 miles. However, in order to purchase coverage from this company, you must be an AARP member.
- If you have a coverage with Farmers Insurance from the time you buy a brand-new car, the firm will replace it with a brand-new one. Within the first two years and 24,000 miles of purchasing a new car, this coverage is applicable.
- Customers of Allstate are eligible for a new automobile replacement throughout the first two model years of a brand-new vehicle.
- Only for brand-new cars, American Family offers new car replacements up to 110% of the totaled vehicle’s original MSRP.
- Ameriprise offers new automobile replacements for vehicles that have been owned for less than a year.
- Erie provides this kind of coverage up until the age of two for your car. If you have this policy and drive an older vehicle, the insurance provider will swap it out for a model that is two years newer.
- If you total your automobile before it has accumulated 15,000 miles of driving or one year, MetLife’s coverage will cover the cost of a new vehicle.
- Up until the age of three, Nationwide offers new car replacement.
- For the first 15,000 miles or 12 months of ownership of a new vehicle, Shelter offers new car replacement to all auto insurance customers.
- If a car is less than a year old, the company will replace it with a new one.
- This kind of coverage is provided by Plymouth Rock for the first 24 months of new car ownership. Additionally, you can upgrade with better options.
- Unless an automobile is damaged by fire or stolen, Penn National gives new car replacement.
- Up until the automobile turns two or has 24,001 miles on it, North Dakota Farm Bureau offers new car replacement.
- For the first 12 months or 15,000 miles after purchasing a new car, Hanover offers coverage.
- Farm Bureau, commonly known as Iowa Group, provides replacement coverage for up to four years for a brand-new car and up to five years for drivers who reside in specific states.
- For a full year, Concord offers free new car replacement coverage. Additionally, customers have the option to buy another 12 months of coverage.
- For the first four years that a new car is owned, Acuity provides coverage. This coverage is also provided for motorbikes by the business.
Conclusion
For some drivers, car replacement insurance can be a wise investment, but it’s not for everyone. When deciding whether to purchase car replacement insurance, make sure to thoroughly compare the cost of the coverage to any potential advantages. Think about things like your car’s age, how much you depend on it, and the comfort it brings to know you’ll have a new car if your present one is stolen or damaged. The choice of whether or not to acquire car replacement insurance is ultimately a personal one that is based on your particular situation.