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New Car Replacement Insurance

Add protection to your full coverage policy today

Illustration of a blue car on top of sheet of paper with an auto insurance policy

What Is New Car Replacement Coverage?

New Car Replacement Insurance pays for the cost of a brand-new replacement (same make and model), minus your deductible, in the event that your vehicle is a total loss. This is specifically for owners of brand-new cars and is intended to protect you financially in the worst case scenario – your new ride is stolen or totaled in a covered event, such as a wreck or fire. This is typically only available under the umbrella of full coverage auto insurance. It has a deductible, just like full.

Your automobile starts depreciating the moment it is driven off the lot.  This type of insurance will help you recoup your investment by paying you for a new vehicle, rather than the depreciated value of your current one. It is only available for cars less than 3 years old but if you want it, you’ll need to purchase it during the first year you own your vehicle. Cars typically depreciate during the first year by 10%.

What is the Cost of New Auto Replacement Insurance?

Most drivers can expect it to increase the cost of their policy by anywhere from 5% to 20%, depending on insurance company.

The average nationally for full coverage is $1,675 per year. So, for example, if you are paying this amount and you found a plan at 5%, your cost would be an additional $83.75 (about $7 more per month). On the other hand, a different package may come in at 20%, which would increase your rates by $335 annually.

Whether that is too much or not is up to drivers to determine for themselves. That extra 5% per year means you can sleep each night knowing you have the protection you need if you end up with a totaled car. That’s peace of mind you can’t really put a price tag on! Your Freeway agent can help you understand the information available for these different options.

What is the Difference Between Full and New Car Coverage?

Full coverage will provide actual cash value of your depreciated vehicle for what is worth at the time it is stolen or declared a totaled car due to an accident. A replacement policy will pay compensation in the amount of a brand new vehicle one of same make and model.

Most automobiles depreciate quickly after leaving the lot – and that’s even more true for expensive sports models. If your ride is declared a complete loss or is stolen soon after you buy it, you’ll lose several thousand dollars out of pocket (the difference between what you paid and the actual cash value). With replacement policy options, your insurer will pay for a brand new one of same or similar make and model.

In a worst-case scenario, you only carry third party insurance and you have a totaled automobile, but no money to pay off your loan or buy a new ride.

You can see what your ride is worth compared to its purchase price by looking at the information available at the NADA guides website.

Is New Auto Replacement the Same as Guaranteed Auto Protection (GAP)?

No and you typically cannot purchase GAP and New Car Replacement Insurance together. It pays off the difference between what you owe on your loan and the actual cash value, saving you some money out of pocket. Replacement pays you compensation in the amount the totaled one is worth new.

Keep in mind that it has an expiration date. Once it expires, you can look into purchasing GAP from your insurer.

Should I Purchase New Vehicle Replacement Insurance?

If your ride is brand new, it’s worth considering some of the factors. Here’s an example. Let’s say you bought it for $40,000. As you drive it over the next few months, it’s worth drops about 10%. Suddenly, it is totaled in an accident. Under your full coverage policy, your insurer wants to give you $36,000 (current value), meaning you are several thousand dollars in out of pocket costs and you won’t have enough money to completely replace it.

With this coverage, your insurer will give you the full value money for a brand new vehicle of the same make and model.

What are the Limits?

New Car Replacement Insurance has guidelines and eligibility factors you must meet to qualify. As we mentioned earlier, one of these is an expiration date. As it states in the name, these coverage options are for new vehicles only. Different carriers define “new” in different ways, so you may be able to keep your new replacement policy for one to five years depending on the insurance company. Some use mileage instead, so, for example, your carrier may insure you for 15,000 miles. Other items include:

  • In most cases, it is only available if you also have collision coverage and comprehensive.
  • It is typically only available for a certain amount of time after your purchase. Depending on your insurance carrier this could be, on average, around six months.
  • Not all insurers offer it.
  • In most cases, it is only available for the original purchaser and is not for lessees.
  • It is only for vehicles of the same model, year and make – or as close as possible.

What is Loan or Lease Coverage?

A Loan or Lease plan is simply Guaranteed Auto Protection (GAP) under a different name. It will pay off the difference between what you owe and the market value if it is totaled or you lose it to theft.

Is There a Deductible?

Yes. As with many policies, you’ll need to meet a deductible before your plan kicks in. You typically will get lower rates with a higher deductible and vice versa. This is one good way, along with car discounts, to make a plan more affordable. However, don’t set your deductible so high that you cannot afford it out of pocket if necessary.

Does It Help with Glass Claims?

In many cases, this type of coverage includes GAP and a lower deductible for glass claims. The only way to find out is to let a Freeway Insurance agent shop around and compare prices and packages for you.

Get Affordable Car Insurance Online Today!

Now you know what new car replacement is and how it can protect your investment. Freeway is here to provide drivers just like you with the automobile insurance you need. We can quickly and easily provide you with an online insurance quote. Or feel free to give us a call at 800-777-5620. Finally, you can also visit us at an office near you.

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