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Which insurance companies will replace your vehicle after a car accident?
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 car with a new vehicle 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?
Details of new car replacement coverage vary by insurance company. Generally, 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.
See below vehicle qualifications and which companies offer new car replacement coverage.
Not all major car insurance companies provide car replacement insurance. Below are popular insurance providers offering new car replacement.
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. This coverage is valid for vehicles older than one year, unlike Liberty Mutual's 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.
Consider the following when gauging the value of new car replacement coverage:
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 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.
*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 depreciation rates. It's impossible to predict the cash payout an insurance company will furnish in the event of a total loss payout.
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 Farm, Progressive, Esurance, and USAA do not offer car replacement insurance, they do provide gap insurance.
Car insurance companies don’t advertise up front how much you’ll pay for their services. 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.