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Key Takeaways

  • New car replacement coverage is best suited for luxury and brand-new cars.
  • Cars without new replacement coverage will receive only their actual cash value (ACV) after depreciation.
  • New car replacement is not the same as gap insurance or better replacement insurance which is offered by most providers.

What is new car replacement insurance?

New replacement insurance coverage is an add-on coverage that can be taken for a brand-new car. If your car is totaled in a crash, then having this coverage will aid you in the complete replacement of the car. However, you will need to meet certain demands to apply and later claim this insurance.

Considering the depreciating value of a car once it hits the roads, it is advisable to get new replacement car insurance that allows you to purchase a new car of the same make and model in case of an unprecedented incident. This coverage is extremely beneficial for owners of luxury and exotic models of cars, considering the value of such cars.

How does new car replacement insurance work?

The cars without new replacement coverage will receive only their actual cash value (ACV) after depreciation. For example, if you own a car worth $40,000 without a new replacement insurance coverage, and it was totaled in a crash after a few months, then you'll be paid only the car's actual cash value, which can be $4000 or $5000 less than the price you bought it at.

On the other hand, if you are equipped with new replacement insurance, then you are guaranteed the full vehicle cost minus the deductible. One should always keep in mind that since the original cost of the car is covered, the cost of this insurance will be high.

How much does new car replacement coverage cost?

Insurer Price of new car replacement coverage
American Family $100
Nationwide $170
Erie $240
AAA $255
USAA $295
Travelers $300
Average $305
Farmers $780

Things to Know About the New Car Replacement Insurance

Understanding your needs and prioritizing them as an owner of a brand-new luxury car is important before you purchase this coverage. Here are certain things you should keep in mind before purchasing a new car replacement coverage.

  ●  Full Coverage Insurance

Full coverage is a prerequisite for this add-on coverage. Apart from the state-required minimum liability insurance, you need to have comprehensive and collision coverage to opt for the new car replacement insurance.

  ●  Restrictions on Age and Mileage

In most cases, new car replacement insurance is only available for cars that are less than a year old and have less than 15,000 miles on the odometer. After this point, you will no longer be protected by this coverage if the crash happens after this period.

  ●  Better Car Replacement

Better car replacement coverage is not the same as a new car replacement. The latter will only compensate for the loss in the case of a one-year-old car that is 15 miles or less, while the better replacement coverage takes care of older cars as well.

  ●  Payment of Deductible

Though you'll receive the actual cost value of the car from the provider, the deductible must be paid to settle the claim.

  ●  Coverage Exclusion

The new car replacement coverage will also not provide coverage for the parts if it was not installed by the maker, like the stereo system.

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Companies that Offer New Car Replacement Insurance

The payout limits and the mileage restrictions can vary between insurance providers. Here is a list of the providers that offer new car replacement insurance.

Insurance Company Coverage Details
Nationwide If the car is less than three years old, the cost of a new vehicle is covered.
Liberty Mutual Cars with 15,000 miles and less than a year-old car are eligible for insurance from Liberty Mutual.
Travelers Unless stolen or damaged by fire, larceny, or flood, totaled cars are replaced within five years.
MetLife Replacement is done only if the car is less than a year old and has been driven for less than 15,000 miles.
The Hartford The period for the coverage to come into effect is 15 months and 15,000 miles.
Farmers It is mandatory to insure your car with Farmers to avail of this add-on from the company. Such cars less than 2 years old with 24,000 miles or less are eligible for new car replacement insurance.
American Family Here it strictly applies to brand new models of cars. The cost of replacement cannot exceed 110% of the vehicle's original manufacturer's suggested retail price (MSRP).
Allstate We will provide a replacement for the car if it is two model years old or less.
Acuity This coverage is in effect for the first 4 years of purchase.
Ameriprise One year or the first 15,000 miles.
Safeco The car must be less than a year old.

New Car Replacement Insurance vs. Gap Insurance

Both these coverages are add-on coverages for new cars. While a new car replacement takes care of the complete replacement of the totaled car, gap insurance covers solely the financial gap that exists between a car loan or lease agreement and a claims payout. So, gap insurance does not provide any monetary assistance in the replacement of a new car.

Gap insurance is more widely available with the insurance providers as it can be opted for a car irrespective of being a luxury model or not. It also stays in effect for a greater number of years. This is advantageous if you are financing your car.

An important thing to keep in mind when you are not opting for both is making sure you have enough savings to repay the loan or make another payment for a new car.

New Car Replacement Insurance vs. Better Car Replacement Insurance

Just like new car replacement insurance, better car replacement insurance is not commonly available from all the insurance providers. Better car replacement coverage may be acquired for older cars and often replaces your vehicle with a comparable, newer model. However, the actual details of this policy can differ according to your provider.

Companies that Offer Better Car Replacement Insurance

Insurance Company Coverage Details
Erie Known as auto security, this coverage enables you to get the newest model year as your replacement car if your damaged vehicle is less than two years old. You get a replacement car with a model that is two years newer if your car is older than two years.
Liberty Mutual You require comprehensive coverage and cannot use it for a leased car. Your replacement vehicle will be one model year newer and will have 15,000 fewer miles than your totaled one.
Selective Insurance The selective car replacement loss coverage replaces your car with the latest model, and the coverage can be kept for 2, 4, or 6 years.

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Is new car replacement insurance worth it?

Several factors need to be considered to determine if this coverage is worth considering. This includes the cost of the replacement insurance, the value of the car after depreciation, your driving history, and the crash rates of your neighborhood, whether you can afford a new car or not.

However, the fact that it does not factor in your car's depreciation when determining your compensation makes new car replacement auto insurance worthwhile to take into account. As a result, even though your car's value has decreased, you won't lose money.

Thus, if you own a new car, the value of the car can be maintained well if you purchase this coverage.

Summary

New replacement car insurance is a good option for brand new cars as well as recently purchased luxury cars.

A new car replacement policy can increase the auto insurance policy by 5% to 10%. This could be $75 to $150 per year or $6 to $13 every month if we calculate based on the national average of $1500 for auto insurance. The rates for the same can vary according to insurers.

How to get new car replacement insurance with Way.com

Even though most companies only disclose only a limited amount for this coverage, it is advisable to do your research before finalizing your insurance provider. New car replacement insurance can be reduced considering the different discounts and coverages the companies provide which suit your needs. It can be time-consuming, but you'll be rewarded with better coverage.

Way.com gives you a head start with the analysis of the best car insurance companies for insuring your brand-new car based on criteria that will surely influence your insurance coverage experience, financial strength, customer service, protection, and price.

Auto Insurance Data Methodology

The auto insurance rates published in this guide are based on the results of research completed by Way.com’s data team. Using a mix of public and internal data, we analyzed millions of rate averages across U.S. ZIP codes.

Quotes are typically based on a full coverage policy average unless otherwise noted within the content.

These rates were publicly sourced from insurer filings and should be used for comparative purposes only — your own quotes will differ. Given this, it’s important to go through our insurance steps form to find how much you can save with way.com

Frequently asked questions

How much does new car replacement insurance cost?

While the national annual average stands around $1500 for car insurance, having an add-on coverage like the new car replacement coverage will increase the insurance rates by $75 and $150 per year.

Can I get new car replacement insurance if I purchase a used car?

No, this coverage is exclusively for a brand-new car, and you need to be the first title holder to buy this policy.

Do I have to buy new car replacement insurance when I buy my car, or can I get it later?

One must get a new car replacement soon after you purchase a car or within six months of your purchase. This is because the coverage entirely depends on the freshness of the purchase as well as the distance traveled. One becomes eligible for this coverage if their car meets the criteria.

Should you get new car replacement insurance?

If you own a luxury or an exotic model, it is advisable to get new replacement car coverage assessing the cost of the car, the depreciating value, the driving history, and the financial status of the owner.

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