WalletHub, Financial Company
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New car replacement insurance makes it possible to replace a recently purchased car that suffered damage due to an accident, theft or another event, without losing the money you spent on it. When you purchase a new car, its value drops as soon as you drive it off the dealer’s lot. So, if you get into an accident that day, or even several months after purchasing your car, the amount of money you would be able to recover for its value through your comprehensive or collision coverage would be significantly lower than what you paid for it. However, new car replacement insurance would ensure you get the full amount.
If you purchase new car replacement insurance, you would be able to recover the value of a new car of the same make and model at the time of your claim, minus your deductible. For example, if you purchased a new car for $25,000, it would likely drop $5,500 in value after you drive away from the dealership. Drivers who do not have new car replacement insurance would be able to recover no more than that lesser value ($19,500) minus their deductible after an accident. If you have new car replacement insurance, you would be able to recover the full $25,000 minus your deductible.
Most insurance companies estimate that the cost of obtaining new car replacement insurance may add as much as 5% to your premium, on average. This cost varies by company, car age and mileage, as well as the driver’s record. Some companies, including Concord Group and Shelter, offer this coverage at no additional cost.
New car replacement insurance isn’t available through all insurance companies. Well-known insurance companies like Geico, State Farm, USAA and Progressive currently do not offer new car replacement insurance. Others – like Allstate, Liberty Mutual and Travelers, do – but their policies vary widely.
Cars eligible for new car replacement coverage are assessed in two ways: age and mileage. Vehicles two years old or younger, or those that have driven less than 15,000 miles are usually eligible. Leased cars do not qualify for this type of insurance.
| Company | Eligibility Details |
| Up to 4 years | |
| Up to 3 years; Replaced by gap coverage | |
| Up to 2 years | |
| Up to 1 year; 110% of manufacturer’s suggested retail price (MSRP) | |
| Up to 1 year or 5,000 miles; 110% of MSRP | |
| Up to 30 days or 1,000 miles | |
| Up to 1 year; Can extend to 2 years, no cost | |
| Up to 2 years | |
| Up to 2 years or 24,000 miles; Must be insured with Farmers already | |
| Up to 4 years; Up to 5 years in some states | |
| Up to 1 year or 15,000 miles | |
| Up to 15 months or 15,000 miles | |
| Up to 1 year or 15,000 miles | |
| Up to 1 year or 15,000 miles | |
| Up to 2 years or 24,001 miles | |
| Does not cover theft or arson damage | |
| Up to 2 years | |
| Up to 1 year | |
| Up to 1 year or 15,000 miles; No cost | |
| Up to 5 years; Does not cover theft, arson or flood; Includes gap coverage |
As cars happen to be a depreciable good, it might be a good idea to add new car replacement coverage to your policy.
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