Posted April 8th, 2019 by Jason Metz
New car replacement insurance is an optional coverage that pays for a brand-new car if your new car is totaled in an accident covered by your insurance. In a typical insurance claim, you receive the actual cash value of a totaled car that’s too damaged to repair -- not money to buy a brand-new car. A car can depreciate by as much as 10% in the first month and by more than 20% in the first year, according to Carfax.com.
New car replacement coverage pays the cost of buying a new car of a similar make and model.
Does my car qualify for new car replacement insurance?
To get new car replacement coverage, you’ll need to have collision and comprehensive insurance, and your car usually needs to be under a certain number of miles and years in age. For example, your car might have to be less than two years old or have less than 15,000 miles on it. New car replacement insurance typically isn’t available for leased vehicles.
How does new car replacement insurance work?
If your vehicle has new car replacement coverage and it’s totaled in an accident covered by your insurance, the insurance company sends you a check (minus your deductible) to replace the totaled car with a new car.
For example, if you buy a new car for $25,000 and it’s totaled in an accident one year later, a 20% depreciation rate would make it worth about $20,000 at the time of the accident. This is the amount you would receive from your auto insurance company, minus the deductible. With new car replacement insurance, you would receive a check that covers the cost of a new car of a similar make and model car.
What insurance companies offer new car replacement?
Here’s a look at whether some of the largest insurance companies offer new car replacement coverage. Note that this coverage may not be available in every state from insurers that offer it.
AARP/The Hartford new car replacement replaces the car if it’s totaled within the first year or 15,000 miles with a new vehicle of the same make, model and equipment.
Allstate new car replacement replaces the car if it’s two model years old or less.
Ameriprise Insurance new car replacement replaces the car if it’s totaled in the first year or the first 15,000 miles. If a new car of the same make and model isn’t available, you could receive up to 110% of the original car’s manufacturer’s suggested retail price.
Farmers Insurance new car replacement replaces the car if it was insured with Farmers when you purchased it and is less than two years old or has less than 24,000 miles.
Liberty Mutual new car replacement replaces a totaled car with a car of the same model year if your car was less than one year old and had less than 15,000 miles on it. Liberty Mutual also offers “better car replacement,” which replaces a totaled car with a vehicle that’s one year newer than the totaled car and that has less than 15,000 miles on it.
MetLife new car replacement replaces a totaled car within the first year or 15,000 miles (whichever comes first) with a new car.
Nationwide Insurance new car replacement replaces a totaled car with a new car of a similar make and model if your car was less than three years old.
Progressive Insurance new car replacement: Progressive does not offer this coverage type.
Travelers Insurance “premier” new car replacement replaces a totaled car within the first five years with a new car of the same make and model. However, cars damaged by fire, flood, theft and larceny are excluded from the program.
Safeco Insurance new car replacement replaces a totaled or stolen car that’s less than one year old with a comparable new car.
State Farm new car replacement: State Farm does not offer this coverage type.
Will gap insurance pay for a new car?
Gap insurance is different from new car replacement coverage and does not pay for a new car. If you owe money on a car loan or lease, gap insurance covers the “gap” between what you still owe and the insurance check for the value of the vehicle.
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