New-car substitute coverage is a form of policy available to policyholders with brand-new cars, so long as they have collision and comprehensive coverage. If your car is totaled in an accident within a certain menstruation after you buy it — typically between one and three years — new-car replacement indemnity will pay for the entire successor price of a newly car that ‘s the lapp gain and model as the one you had. You ‘ll only be responsible for paying the deductible associated with your comprehensive examination or collision coverage .

What is new-car replacement insurance?

Cars depreciate over time, losing prize as they get older and rack up miles. brand-new cars lose their value the fastest. so if your car is totaled soon after you purchase it, you ‘ll be without a cable car, and the amount your insurance company pays out likely wo n’t cover an accurate substitute. This is because comprehensive and collision coverages only cover the actual cost value, or ACV, which factors in depreciation .
additionally, more expensive vehicles tend to lose their value faster than less-expensive automobiles .
New-car refilling indemnity makes up the price dispute between your depreciate model and a brand-new car.

Some insurance companies take new-car substitution coverage a measure further and may pay for a newer model year than the one you previously owned, making it an extra-appealing choice in those cases .

Is new-car replacement coverage worth it?

There ‘s no simple formula to determine whether new-car refilling policy is worth the monetary value, merely as there ‘s no convention to set the adjust grade of indebtedness coverage. It depends on how much risk you’re willing to tolerate or how much you’re willing to pay to protect yourself against the risk. When deciding whether you want to add substitution coverage to your policy policy, consider :

  • Whether your car is likely to be totaled in an accident.
  • How quickly your car is depreciating. Newer and more expensive cars depreciate faster, making replacement coverage a greater value.
  • Whether you can afford to replace your car without this type of coverage.
  • The amount your insurance company charges for coverage.

For case, a brand-new $ 60,000 luxury sedan will probable depreciate by about 25 % — or $ 15,000 — within the first year. To decide whether new-car replacement is worth it, consider the likelihood your car will be in an accident and whether the coverage is worth the excess monthly expense. New-car substitute coverage on a $ 60,000 vehicle costs around $15 extra per month from Farmers Insurance .
ultimately, the best manner to determine whether new-car surrogate is worth it for you is to consider whether the extra cost is justified by the peace of mind it offers. With new-car replacement coverage, you ‘ll be able to drive and enjoy your newfangled car without worrying about what would happen if it was totaled in an accident .

The cost of new-car replacement insurance

The monetary value of new-car refilling indemnity varies importantly by indemnity company. It ‘s typically an optional coverage, meaning you’ll pay extra on top of a standard auto policy to get it. But the exact amount you ‘ll pay depends on :

  • Your driving history
  • The type of car you own
  • The individual policy

The only room to get a authoritative answer is to get a quote .

What companies offer new-car replacement?

New-car refilling indemnity is available from many insurers, but not every company offers it. Among the 10 most prevailing insurers in the United States, new-car successor coverage is available at :

  • Allstate
  • American Family
  • Farmers
  • Liberty Mutual
  • Metlife
  • Nationwide/Allied
  • Travelers

New-car replacement coverage eligibility

Since the remainder between your car ‘s actual cash rate ( ACV ) and refilling cost only grows over time, most insurers limit how long they’ll provide replacement coverage for your fresh car. The exact restrictions vary by insurance company, but the limits typically include a maximum age and mileage. You ‘re besides normally required to purchase comprehensive and collision coverage in order to qualify for new car replacement insurance .


Eligibility requirements

Allstate Car must be 2 model years old or newer
Farmers Car must be newer than 2 years old and have fewer than 24,000 miles
Liberty Mutual Car must be under 1 year old and have fewer than 15,000 miles. Older cars are eligible for “better car replacement,” which provides a car 1 year newer with 15,000 fewer miles than yours had pre-accident.
Nationwide (through Allied) Car must be newer than 3 years old
Travelers Car must be less than 5 years old, and you must be the original owner

New-car replacement vs. gap coverage

Gap coverage is a type of policy that ‘s available to drivers who have a lease or loanword on their fomite. New-car refilling and gap coverage both aid make up the remainder between the ACV of your car and what it will cost for you to replace the vehicle, if it is totaled in an accident .
however, gap coverage only pays off your lease or loan amount, so you wo n’t owe money on a cable car you no longer own. New-car replacement goes one step further and pays for the entire replacement cost of a new vehicle identical to the one you had .
collision coverage would pay what the car is worth, or $20,000 minus your deductible.

For case, let ‘s say you bought a new car for $ 25,000. After 12 months, it ‘s worth $ 20,000, and you still owe $ 22,000 on the loan. If you were in an accident and the car is totaled, youror $ 20,000 minus your deductible. New-car replacement coverage would pay for an identical brand-new car — in this sheath, an extra $ 5,000. Gap coverage would only cover the difference between what collision pays and what you owe — in this case, $ 2,000. You would n’t have a car, but you would not owe any money on your car loan, either. The comply graph shows the payout of new-car substitute coverage after your car is totaled.

Graph showing payout of new car replacement coverage after your car is totaled
This graph shows how gap coverage can help following an accident .
Graph showing payout of gap coverage after your car is totaled
Gap indemnity is a more normally available alternative to new-car refilling. It ‘s offered by Geico, Progressive, State Farm and USAA, none of which provide new-car substitution policy. You can learn more about the price of Gap insurance in our article about the average cost of gap policy .
If you are buying a new car and your indemnity caller does n’t offer new-car substitute policy, you might consider adding gap coverage alternatively if you want to stay with your current insurance company .

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