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.