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Why You Should Replace a Vehicle on Your Insurance

If you've recently purchased a new vehicle, it's worth considering new car replacement insurance. This type of insurance policy will give you peace of mind and protect you from financial loss in the event of an accident. While it's not a legal requirement, new car replacement insurance can be invaluable if your new vehicle is damaged beyond repair.

New car replacement insurance covers the cost of replacing your vehicle with a brand-new model of the same make and specification if your car is written off in an accident or damaged beyond repair. This type of insurance is particularly useful if you've purchased an expensive car, as it can depreciate in value by as much as 10% as soon as you drive it off the lot.

In the unfortunate event of a write-off, standard insurance would only reimburse you for the car's depreciated value, leaving you out of pocket if you wanted to replace it with an identical model. With new car replacement insurance, you're covered for the full price of a new car, minus your deductible.

It's worth noting that new car replacement insurance is usually purchased in addition to comprehensive and collision insurance, which covers repairs and the cost of vehicle damage in an accident, regardless of who is at fault. While it does add around 5-10% to your insurance premium, new car replacement insurance is relatively inexpensive and can save you a lot of money in the long run.

So, if you want to protect your new vehicle and ensure you're not left out of pocket, new car replacement insurance is a great option.

Protects against vehicle depreciation

Car insurance is designed to protect you and your vehicle in the event of an accident or theft. One important aspect to consider when purchasing car insurance is how it can help safeguard you from the effects of vehicle depreciation.

When you buy a new car, it immediately starts to lose value, and this depreciation can be significant. Within the first year, a car can lose up to 20% of its value, and this decline continues over time. This depreciation affects not only the resale value of your car but also the insurance claim you'll receive if your car is damaged or written off.

When filing an insurance claim, the insurance company calculates the claim amount based on the car's current value, which is lower than the original cost due to depreciation. This means the compensation you receive might not be sufficient to cover the cost of repairs or the remaining balance on your car loan.

To address this issue, some insurance companies offer new car replacement insurance or a zero-depreciation add-on. Here's how these options can protect you from the negative impact of vehicle depreciation:

New Car Replacement Insurance

New car replacement insurance provides added protection by offering to reimburse you for the cost of a brand-new car of the same make and model if your vehicle is totalled in an accident. This coverage ensures that you receive enough money to purchase a new car without having to worry about the depreciated value of your old car.

For example, let's say you bought a new car for $40,000 and added new car replacement insurance. If your car is totalled in an accident after a few months, with its value depreciated to $36,000, the insurance company will still reimburse you for a new model of the same vehicle instead of just $36,000.

Zero-Depreciation Add-on

The zero-depreciation add-on is another option to consider. With this add-on, the insurance company will not factor in depreciation when calculating the claim amount. This means they will compensate you for the full value of your car, rather than the depreciated value. This add-on is typically available for new cars for the first few years of ownership.

By opting for new car replacement insurance or a zero-depreciation add-on, you can ensure that you receive adequate financial protection in the event of an accident, even as your vehicle depreciates over time. These options give you peace of mind and help maintain the value of your car, so you don't have to worry about being stuck with a totalled car and insufficient funds to replace it.

Peace of mind

Protection Against Vehicle Depreciation

New car replacement insurance shields you from the financial loss due to vehicle depreciation. Cars can lose a significant portion of their value within the first few months or years of ownership. If your new car is totalled in an accident, standard insurance would only reimburse you for the depreciated value, leaving you with a gap to cover. New car replacement insurance ensures you receive the full purchase price of a new vehicle of the same make and model, minus your deductible. This protection gives you peace of mind, knowing that you won't face a financial burden if your new car is totalled.

Stress-Free Enjoyment of Your New Car

The knowledge that your new car is fully protected can provide a sense of reassurance and calm. With new car replacement insurance, you can drive your new vehicle without constantly worrying about accidents or unexpected events that could result in a total loss. This peace of mind allows you to truly enjoy your new car and focus on the driving experience rather than anxiety about potential financial losses.

Relatively Inexpensive Coverage

While the cost of new car replacement insurance varies depending on factors like your insurance carrier, driving history, and vehicle type, it is generally considered affordable. On average, it increases your insurance policy cost by around 5-10%, which is a small price to pay for the added peace of mind. This extra coverage ensures that you won't be left with a substantial financial burden if your new car is totalled, making it a worthwhile investment for many car owners.

Avoid Partial Payment for a Replacement Vehicle

Without new car replacement insurance, you might find yourself in a situation where you have to pay out of pocket to replace your totalled vehicle. Standard insurance policies only reimburse the depreciated value of your car, which may not be sufficient to cover the cost of a new one. With new car replacement insurance, you can rest assured that you will receive enough money to purchase a brand-new vehicle of the same make and model, eliminating the stress of partial payments and financial strain.

Protection for High-Value and Rapidly Depreciating Vehicles

If you own an expensive or luxury vehicle, new car replacement insurance becomes even more crucial for peace of mind. The higher the cost of your car, the more sense it makes to invest in this type of insurance. Additionally, certain cars, like luxury sports cars and electric vehicles, tend to depreciate rapidly. New car replacement insurance ensures that you won't be left with a large financial gap to fill if your high-value or rapidly depreciating vehicle is totalled, providing a sense of security and peace of mind.

Relatively inexpensive

Why New Car Replacement Insurance is Relatively Inexpensive

New car replacement insurance is an optional type of auto insurance that covers the cost of replacing a totaled car with a brand-new vehicle of the same make and model. This type of insurance is relatively inexpensive and can bring peace of mind when driving a brand-new vehicle. Here are some reasons why:

Protects Against Vehicle Depreciation

The primary purpose of new car replacement insurance is to protect car owners from the financial loss associated with vehicle depreciation. A car can lose a significant portion of its value within the first few months or years of ownership. If the car is totaled during this period, the insurance company will reimburse the full purchase price, minus any applicable deductible, allowing the owner to replace it with a brand-new vehicle of the same make and model. This can result in a substantial savings compared to the depreciated value of the car.

Peace of Mind

New car replacement insurance provides peace of mind for car owners. Knowing that you are covered for the full initial value of your car can reduce the stress and worry associated with the possibility of an accident or total loss. This type of insurance ensures that you won't have to spend additional money to replace your vehicle if it is damaged beyond repair.

Affordable Cost

The cost of new car replacement insurance is relatively low, typically increasing the overall insurance policy cost by around 5% to 10%. While the exact cost depends on factors such as the insurance carrier, driving history, and vehicle type, the few hundred dollars extra per year is a small price to pay for the added protection. This is especially true when compared to the potential financial loss due to vehicle depreciation, which can be much higher.

Recommended Scenarios

There are certain scenarios where purchasing new car replacement insurance is highly recommended:

• Your vehicle is less than a year old.
• Your vehicle has less than 15,000 miles on it.
• You are the first owner of the vehicle.
• Your vehicle depreciates rapidly, such as luxury sports cars or electric vehicles.
• There is a high chance that your vehicle could be declared totaled due to an accident or other factors.

In summary, new car replacement insurance is a relatively inexpensive option that can provide significant financial protection and peace of mind for car owners, especially those with new vehicles. By covering the cost of replacing a totaled car with a brand-new vehicle of the same make and model, this type of insurance shields car owners from the effects of vehicle depreciation and gives them the assurance that they can replace their car without incurring additional expenses.

Only available for new cars

Why You Should Get New Car Replacement Insurance

Protects You from Vehicle Depreciation

New car replacement insurance is a great way to protect yourself from the depreciation of your new car. Vehicles can lose a significant amount of their value in the first few months or years of ownership. This type of insurance ensures that you will be able to purchase a brand-new car of the same make and model if your current one is totaled within the first few years of ownership. This can save you a lot of money, as you won't have to pay the difference between the depreciated value of your car and the cost of a new one.

Gives You Peace of Mind

Having new car replacement insurance can give you peace of mind, knowing that even if your new car is totaled, you will be able to get a brand-new replacement without having to spend more money. This can be especially important if you rely heavily on your car for work or other commitments.

Relatively Inexpensive

The cost of new car replacement insurance is relatively low, typically adding only about 5% to your auto insurance premium. This means that you can get a lot of value for a relatively small increase in your insurance costs. Of course, the exact cost will depend on factors such as your insurance carrier, driving history, and vehicle type.

Widely Available

While not all insurance companies offer new car replacement insurance, it is available from several major providers, including:

• Erie Insurance
• Liberty Mutual
• Allstate
• Farmers Insurance
• The Hartford
• Travelers

It's important to note that new car replacement insurance is typically only available for new cars. To be eligible, your car must usually be less than a year old and have less than 15,000 miles on the odometer. Some insurers may offer coverage for slightly older vehicles, but generally, the car should be relatively new. Additionally, you will need to have collision and comprehensive insurance in order to qualify for new car replacement insurance.

Requires comprehensive and collision insurance

Comprehensive and collision insurance are typically required for the life of an auto loan. Collision coverage protects your vehicle no matter who is at fault, while comprehensive insurance protects your vehicle from theft, vandalism, and environmental damage such as fallen tree branches and flooding.

If you have comprehensive and collision insurance, your insurance company will pay out up to the car's value, minus any deductible, if your car is stolen or totaled in an accident. However, because new vehicles lose value quickly, the payout may be less than what you paid for the car, leaving you with a financial burden and no ride.

This is where new car replacement insurance comes in. This type of insurance is an optional add-on to your comprehensive and collision insurance. It covers the cost of replacing your car with a brand-new vehicle of the same make and model if your car is declared a total loss. This means that you won't have to worry about being reimbursed for the depreciated value of your vehicle and will be able to replace it with a new one.

The cost of new car replacement insurance varies depending on the insurer, but it typically adds about 5% to 13% to the price of your comprehensive and collision coverage. For example, if your comprehensive and collision insurance costs $100 per month, you can expect to pay an additional $5 to $13 per month for new car replacement coverage.

It's important to note that new car replacement insurance is usually only available for cars under a certain age or mileage. Most insurers offer this coverage for cars that are less than two years old, with some insurers providing coverage for slightly older vehicles. Additionally, your vehicle typically cannot have more than 15,000 to 24,000 miles on it to qualify for new car replacement insurance.

Frequently asked questions