New Car Replacement Insurance: What to Know

Which insurance companies offer replacement cost car insurance, and is it worth the extra cost?
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Ava Lynch

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Ava joined The Zebra as a writer and licensed insurance agent in 2016. She now works as a senior analyst, providing insights and data analysis as one…

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Beth Swanson

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What is new car replacement insurance coverage?

While details may vary, new car replacement is essentially what it sounds like. If you carry this add-on coverage, your insurance company will replace your totaled vehicle with a brand new car after a collision. In order to qualify for new car replacement coverage, you'll need physical coverage — collision and comprehensive — and your vehicle will need to be relatively new (mileage maximums may apply).

Let’s explore the ins and outs of new car replacement to answer the question: is new car replacement insurance worth it?

Key Takeaways

  • Not every insurance company offers new car replacement insurance
  • There are several factors to consider, such as the value of your vehicle, when considering the cost of the insurance
  • Gap insurance may be an option that is easier to obtain than new car replacement insurance
  • Be sure to compare rates from different companies and see what coverage options are available

How does new car replacement work?

New car replacement insurance covers the cost of replacing your totaled vehicle with the same vehicle in the event of a covered loss. In order to qualify for new car replacement insurance, you may need to carry comprehensive and collision coverages, relatively uncommon coverage levels for a new car. Details of new car replacement coverage vary by the insurance company. 

See below vehicle qualifications and which insurance companies offer new car replacement coverage as part of an auto policy.

new car

Which insurance companies offer new car replacement?

Not every car insurance company offers new car replacement insurance.

Below are popular insurance providers with new car replacement options:

Insurer Details
Allstate Will replace the vehicle if it is two or fewer model years old.
American Family Applies only to brand new vehicles. Replacement cost cannot exceed 110% of the totaled vehicle's original MSRP.
Farmers Applies only to vehicles insured with Farmers upon purchase and less than two years old, with 24,000 or fewer miles.
The Hartford Replaces totaled vehicles bought within 15 months or 15,000 miles of the accident.
MetLife Replaces totaled vehicles with a new version if it is less than a year old or has fewer than 15,000 miles.
Travelers Replaces totaled vehicles within five years unless stolen or damaged by fire, larceny, or flood.
Liberty Mutual Pays cash for a new vehicle if the totaled car has fewer than 15,000 miles and is less than one model year old.
Nationwide/Allied Covers the cost of a new vehicle if the totaled car is fewer than three years old.

Additional coverage options and fine print

In addition to new car replacement, some insurance companies offer other coverage options:

  • Travelers — Premier Car Replacement: This includes new car replacement, loan/lease gap coverage, and glass deductible coverage, which lowers the deductible on any window-related claims.
  • Liberty Mutual — Better Car Replacement: This provides replacement funds toward a vehicle one year newer — and with 15,000 fewer miles — than your totaled vehicle. Vehicles older than one year retain eligibility for this program, unlike Liberty Mutual's standard New Car Replacement policy option.
  • The Hartford — New Car Replacement: This coverage is part of AARP's and The Hartford’s car insurance program. In order to qualify for this coverage, you must be an AARP member.

Is new car replacement insurance worth it?

Consider the following when deciding whether or not new car replacement coverage is worth it:

  1. The cost of car replacement insurance
  2. The value of your vehicle after depreciation
  3. The likelihood of your vehicle being totaled
  4. Your ability to afford a new vehicle

For example, a driver is buying a 2019 Chevy Suburban for $50,800 and debating whether or not to add new car replacement. The rules of automotive depreciation dictate how much this SUV will be worth in the years following its purchase. If the car is totaled after one year of ownership, new car replacement coverage would only refund 75% of the car's original cost. 

value depreciation

*Data from Edmunds.com

This payout would not be enough to cover the purchase price of a new Suburban.

If you know ahead of time you will want another new model, you might want to speak to your provider or insurance agent about adding this coverage. Bear in mind, the above example is based on estimated rates of depreciated value. It's impossible to predict the cash payout an insurance company will furnish in the event of a total loss payout.


Car replacement insurance vs. gap coverage

Gap insurance and new vehicle replacement are common coverage options for new vehicles. Each helps to cover the difference between the actual cash value — including depreciation — of your vehicle and its original value.

Gap insurance offers no help finding a new vehicle: it only covers the difference between a car loan or lease contract and a claims payout. It protects drivers from owing money on a car loan after totaling their vehicle. Gap insurance is more readily available than new car replacement insurance. Although State FarmProgressiveEsurance and USAA do not offer car replacement insurance, they do sell gap insurance.


How much does new car replacement insurance cost?

Car insurance companies don’t advertise upfront how much they charge for a service like new car replacement insurance. Most companies estimate an average rate hike of 5% for new car replacement insurance. This total may vary by insurance company and vehicle.

The primary factors contributing to how much a driver pays for insurance aren't extras like new car replacement coverage. Instead, factors like past driving record, location and the pricing structures of each insurance company carry more weight. The best way to find affordable auto insurance is to compare policies from as many companies as possible. If you’re interested in seeing quotes from local and national companies for the coverage options you need, enter your ZIP code below.

money

Compare car insurance quotes and find a policy today.

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