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New Car Owners Can Buy a Replacement Policy that Pays Off if Their Car is Totaled
When you have a new car, the last thing you want to think about is getting into an accident. Unfortunately, though, it does happen. And if your car is declared a total loss, you may find yourself not only without your new car, but also in a bad financial position.
That’s because when you drove the car off the lot, it immediately started to lose value. Your insurance company will pay you only for what your vehicle is currently worth, and you’re likely to owe more than that amount on your loan.
What Happens If You Total Your New Car?
For example, if you buy a $20,000 car, it may be worth only $17,000 in six months. If you’re in an accident that makes your car a total loss, you’ll receive that amount from the insurance company, but you’ll still owe close to the original $20,000 on your car loan.
Even if you don’t finance your car, you’re still left with only $17,000, which won’t be enough to buy the same type of car again.
How Does New Car Replacement Insurance Work?
One way to protect yourself from this situation is by purchasing new car replacement insurance. This type of insurance will usually pay for a new car of the same make and model if yours is totaled. It usually pays a maximum of your vehicle’s price, plus an additional 10%.
New car replacement insurance is similar to GAP (Guaranteed Auto Protection) insurance coverage, which pays the difference between your car’s value and the amount of your loan. New car replacement insurance, however, fully covers the cost of replacing your vehicle, without deducting any depreciation.
New car replacement insurance also typically offers coverage for a shorter amount of time than GAP insurance. Sometimes they’ll be part of the same policy, and new car replacement insurance will automatically convert to GAP insurance after a fixed amount of time.
Not all auto insurance companies offer new car replacement insurance, so if you’d like this type of coverage, you’ll need to shop around. Make sure that the company you’re getting a quote from offers this type of insurance and that they specifically offer it in the state where you live.
Comparing Specific New Car Replacement Policies
The following are some major companies’ new car replacement insurance offerings, along with some details about each company’s specific policies:
Allstate New Car Replacement
Allstate’s new car replacement insurance is available as an additional option that’s part of its Your Choice Auto® insurance plan. This coverage also includes features such as Accident Forgiveness (your rates won’t go up because of an accident, even if you were at fault) and a Safe Driving Bonus (in the form of a check every six months you don’t have an accident). It’s not available in all states, however.
The new car replacement portion of the Your Choice Auto insurance plan covers your car for its first three model years, with coverage starting immediately after signing up. Learn more about All State car insurance.
Liberty Mutual New Car Replacement
Liberty Mutual offers new car replacement as a standard feature on all their auto insurance policies. Your deductible still applies, and your car must be less than a year old and have fewer than 15,000 miles on it.
Liberty Mutual also has a similar option called Better Car Replacement®. This coverage will replace your car for one that’s one model year newer and has 15,000 fewer miles on it than your current car. Your car has to be a total loss, and you’ll still have to pay your deductible. This type of coverage isn’t available in North Carolina.
Allied New Car Replacement
Allied, which is a Nationwide insurance company, offers new car replacement coverage as part of its Good-As-New® policy.
It covers your car with new car replacement insurance until its three years old, and after that point, it’s covered by GAP insurance, which continues until your vehicle is six years old.
Nationwide New Car Replacement
Nationwide offers a new car replacement plus policy, which combines GAP coverage with coverage for new car replacement. If your vehicle is under two years old and is totaled, it will be replaced with a new vehicle.
If your car is three to five years old, GAP coverage takes over. New car replacement plus coverage doesn’t apply if you lease your car.
Travelers New Car Replacement
Travelers has a Premier New Car Replacement® policy that replaces your new car with the same make and model if you total it in the first five years. If you’re leasing or financing your car, GAP insurance is also a part of Travelers’ Premier New Car Replacement policy.
Finally, it also includes a glass deductible in case you have a glass-only loss. This is lower than the typical comprehensive auto insurance policy deductible — the type of insurance that usually covers this kind of damage.
If you’d like to purchase new car replacement insurance without the Gap insurance or lower glass deductible, that’s also an option.
Farmers New Car Replacement
Farmers Insurance calls its new car replacement insurance its New Car Pledge®. Farmers will replace your new car with one of the same make and model if it’s totaled. Your deductible still applies.
To qualify, your car must have fewer than 24,000 miles and be no more than two model years old. As an addition part of this protection, if your car is not totaled but can be repaired, Farmers will make sure that only original equipment manufacturer-quality parts are used if available.
Progressive New Car Replacement
Progressive doesn’t offer a new car replacement policy, but instead has a Total Loss Concierge service. If your car is declared a total loss, you can utilize Progressive’s Concierge service to help find the specific make, model, price range, and color of car you’d like, and they’ll work with their network of dealers to find you a car. They can also arrange financing if you’d like.
The Total Loss Concierge service is free, and Progressive states that you may be able to get a better deal with them than on your own.
If you’d like to purchase new car replacement insurance, compare car insurance with Insurantly to make sure you’re getting the coverage that best suits your needs. Each company that offers this type of insurance has different requirements and coverage limits, and each will also have different rates based on such factors as your age, driving history, and where you live.
Ameriprise New Car Replacement
Ameriprise offers new car replacement insurance, which can be purchased by itself or added to a GAP policy. New car replacement covers the first year that you own your new car, and then it converts to GAP insurance if you’ve chosen to package both types of insurance together.
Ameriprise doesn’t offer GAP insurance by itself – it must be purchased along with new car replacement insurance.
New car replacement auto insurance coverage is nice to have if needed after an accident. Here is what you need to know when putting car insurance on a new car.