What Is New Car Replacement Coverage?
Totaling your car is every driver’s worst nightmare. You can take all the defensive driving classes in the world, but time and unexpected events happen even to the most skilled drivers. When your car is totaled, your insurance company deems it as a loss and will pay you what’s called “actual cash value,” or ACV for your car.
Unfortunately for you, the minute you drove your car off the lot, its value took a sharp nosedive. This means that the actual cash value you receive could be hundreds or even thousands of dollars less than what you paid for it. Which leaves you stuck paying the difference to buy a new car.
To save the legacy of your car and wallet, this is where new car replacement coverage comes in. If your car is stolen or totaled and declared a loss, you won’t be left out in the cold.
What is New Car Replacement?
New car replacement coverage ensures that your insurance company covers the cost of a brand new vehicle of the same make and model, minus your deductible.
To put things in perspective, imagine that you just bought a brand new Honda Civic for $30,000. A few months after buying your car, its value has depreciated to $26,000, and it’s stolen from your neighborhood. Without new car replacement coverage, your insurance company will only award you $26,000. With this coverage, you’ll get the value of a new model of the same Honda Civic — likely the full $30,000. That new car replacement is sounding pretty great, isn’t it?
Before you go rushing to get your insurance provider on the line, here are few more things to know about new car replacement coverage:
- There is a purchase window. Insurance companies may have a window of time for you to add on this coverage. Some companies may require you to purchase it within six months of purchasing your vehicle, while others need you to have it before an accident.
- Your vehicle needs to meet the requirements. This type of insurance is typically only available on cars that are less than two years old. Depending on the insurance company, there may be a mileage limit as well.
- You need to have collision and comprehensive insurance first. If your insurance company offers new car replacement coverage, you can add it to your current collision and comprehensive insurance.
- Don’t forget about your deductible. Remember that the amount awarded to you will be subject to your deductible. For example, if your deductible is $500 and you are given $18,000, you’ll be left with $17,500.
What Companies Offer New Car Replacement?
Several major insurance companies offer new car replacement insurance. You can find this coverage at companies such as Liberty Mutual, Allstate, MetLife, and Travelers. Keep in mind though, that the details of coverage vary from each provider.
How Much is New Car Replacement?
Some companies bundle this coverage with several other upgrades, and others make drivers pay extra in addition to their standard policy. The only way to receive an accurate quote is to contact your insurance company to find out specifics.
Do I Need New Car Replacement?
If you’ve recently purchased a new vehicle, it may be in your best interest to purchase new car replacement insurance, because once you drive your new car off the lot, your vehicle immediately depreciates. This is one way to protect you from financial hardship if your car is totaled.
Ultimately, the decision comes down to how much you’re willing to risk the value of your car. If you live close to your job and spend little time on the road, the chances of you totaling your car are low. However, if you spend a lot of time driving, it may be worth it to consider new car replacement coverage. This way, you can kiss your worries of depreciation goodbye.
New Car Replacement vs. Gap Insurance
Although gap insurance and new car replacement coverage may seem similar, learning the difference between them could help you out when you need it the most.
Gap insurance stands for “guaranteed asset protection.” This coverage is used when a driver decides to lease a car or takes out a loan to buy a new car.
In case of a total loss, your collision or comprehension insurance may not cover everything that you owe on the car’s lease or loan. Gap insurance pays the difference between the actual cash value of the car and the amount left on your lease or loan, making sure you’re not “stuck under water” on your loan.
If you’re unsure which type of insurance is right for you, take some time to sit down and compare the terms. Some drivers are better suited for one type of coverage, so get quotes from your insurance company and weigh out all your options.
How to Find Affordable Car Insurance
Although it would be great to have a list of insurance companies with the cheapest rates, it isn’t possible. However, this doesn’t mean that you’re doomed to paying exorbitant rates for the rest of your life. With a little patience, research, and some comparing, you can find affordable car insurance for you and your family.
Compare.com makes it easy for anyone to find the best car insurance rates. Enter your info once, and you’ll find the most accurate and affordable car insurance rates from several insurance companies.
To find out more about how to get the best rates, visit Compare.com, or enter your ZIP code down below to get started! And best of all, it’s 100% free!