Explaining New Car Replacement Insurance
Explaining New Car Replacement Insurance

Explaining New Car Replacement Insurance

An automobile’s depreciation in price can come again to chunk in case you get into a coincidence shortly when you buy the car. Your vehicle insurance corporation may additionally place a fee on your vehicle that’s much less than the purchase price due to depreciation—and your declare take a look at won’t be enough to cover your automobile loan. That means you get caught paying the difference in your lender.

There is an answer that can assist in this situation: new car substitute coverage.

What Is New Car Replacement Insurance?

New automobile alternative coverage offers you money for a state-of-the-art automobile of the same make and version (minus your deductible) in place of the depreciated cost of your totaled vehicle if your car gets totaled.

Cars can lose over 10% of their fee for the duration of the first few months of ownership and over 20% within the first year, in keeping with Carfax.

For example, let’s say you got a new vehicle for $40,000 and bought a new car with alternative insurance. After numerous months, the fee of the car has depreciated to $36,000 and you get into an accident, totaling the car. With new automobile substitute insurance, your automobile coverage organization would reimburse you for a brand new model of the identical car, no longer just $36,000.

If you don’t have new car replacement insurance, you will need to absorb the difference if you buy some other emblem-new vehicle of the same version.

You Need Collision and Comprehensive Insurance

If your automobile coverage business enterprise sells substitute automobile insurance, you can normally purchase it as an add-on insurance in case you additionally have collision and comprehensive coverage.

Vehicle Age and Mileage Requirements

Eligibility requirements for new automobile substitute insurance vary depending on the insurance corporation. For instance, Erie Insurance’s Auto Security upload-on will provide a budget to update a totaled car that’s less than years old with the latest model. If the automobile is older, this new vehicle alternative insurance gained’t practice.

Farmers vehicle insurance has new car alternative insurance that replaces a car with the equal make and model if it’s inside the first version years and has 24,000 miles. Read the excellent print and apprehend the limits of the policy.

“Better Car Replacement” Insurance

With “better vehicle substitute” coverage, you get cash for a “more recent” or “better” version of your automobile. For instance, Erie Insurance will reimburse you the fee to replace your totaled automobile with the most modern comparable version yr if you owned it for much less than years. If you’ve owned it for more than two years, Erie will update your totaled vehicle with a version that is two years newer.

Deductibles for New Car Replacement Insurance Claims

Generally, a deductible will be observed for new vehicle substitute coverage. Your deductible is the amount the coverage agency deducts from a claim payment. For instance, in case your claim settlement is $20,000 and you have a $500 deductible, the insurance organization can pay $19,500.

New Car Replacement Insurance Rules and Limitations

Here are some common policies about new automobile alternative insurance.

Policy Purchase Windows

Insurance businesses may have a time frame for when you have to purchase new vehicle replacement insurance. For instance, Nationwide automobile insurance requires you to buy coverage within six months of a brand-new car buy. Erie Insurance helps you to add its Auto Security to a policy at any time, as long as it’s before a coincidence.

Can’t be Combined With Gap Insurance

You may not have the ability to buy each new car replacement coverage and gap coverage. If your car is deemed a total loss, hole insurance pays the difference between the extremely good balance of your hire or mortgage and the actual cash fee of the car.

Insurance Companies That Sell New Car Replacement Insurance

New automobile alternative insurance isn’t provided by way of all coverage agencies and won’t be to be had in all states by insurers that provide it.

Here are a few insurance organizations that provide new car substitute insurance.

AARP Auto Insurance from The Hartford

New vehicle substitute insurance from AARP automobile insurance replaces your car with a brand new vehicle of the same make, model, and equipment if your car changed into totaled inside the first 15 months or 15,000 miles (whichever comes first).


New automobile substitute coverage from Allstate will update a brand new vehicle if it’s two model years old or less.

American Family

Only modern-day cars are blanketed by new car replacements from American Family. The insurance replaces your new vehicle with the same make and version if it’s totaled, and the coverage is robotically eliminated after 12 months of being in pressure.


New vehicle replacement coverage from Amica is to be had through the business enterprise’s Platinum Choice Auto bundle. The business enterprise’s new alternative insurance replaces a totaled vehicle with a new automobile if it’s below a yr and has fewer than 15,000 miles on it.


With new vehicle replacement from Auto-Owners, your new car is changed with the equal make and model if it’s totaled.

Erie Insurance

With Auto Security from Erie Insurance, vehicles less than two years old are replaced with the most recent model. If your vehicle is greater than years old, you will be reimbursed for a comparable model that’s years newer.


New car alternative coverage from Farmers Insurance will pay to update your car with a brand new one of the same make and version if the auto is totaled within the first two version years and 24,000 miles.

Horace Mann

Both new car replacements and better car replacements are provided with the aid of Horace Mann. If you’re an educator, you can get new automobile replacements as an unfastened advantage as a part of the Educator Advantage Program.

Liberty Mutual

New automobile substitute coverage from Liberty Mutual can pay for a brand new automobile if your totaled vehicle is underneath 365 days old and has much less than 15,000 miles. They also offer better vehicle alternative insurance which pays for an automobile that’s one model 12 months more recent and 15,000 fewer miles than your modern vehicle.


New automobile alternative from Nationwide car coverage pays to update the car as long as it’s much less than three years old.

NJM vehicle insurance

If your new automobile has much less than 15,000 miles and it’s totaled within 365 days of your purchase, a new vehicle alternative from NJM vehicle coverage pays to update it with a brand new model.


If you’re the unique owner of a vehicle much less than one year old and with fewer than 15,000 miles, and it’s been totaled or stolen, a new vehicle alternative from Safeco automobile insurance covers the fee of a similar new automobile.


“Premier” new car replacement from Travelers will pay to update the automobile with a new one of the same make and version in case your automobile is totaled in the first 5 years of possession.

Do I Need New Car Replacement Insurance?

If you just bought a new vehicle, new car substitute insurance might be worth thinking about. Since your vehicle can depreciate appreciably after you force off the lot, this coverage is probably a low-priced manner to hold the fee of your vehicle in case you get into a twist of fate and general it.

By evaluating the modern-day price of your automobile on a domain along with J.D Power on your buy price, you can verify your state of affairs. The distinction between the two numbers is approximately the amount you would be answerable for if you didn’t have alternative coverage.

Keep in thoughts, the amount of time and miles required to buy new automobile substitute insurance depends on the insurance agency. For instance, Liberty Mutual replaces a vehicle that’s less than 12 months vintage however Travelers has insurance for automobiles as much as 5 years old.

Pricey luxurious automobiles and electric-powered automobiles tend to depreciate the quickest, consistent with 2022 observation from iSeeCars. For example, manufacturers like Maseratis and BMWs depreciate the quickest, even as Jeeps and SUVs tend to keep their prices higher.

The examine located that the average automobile depreciated via 33.Three between 2017 and 2022.

New vehicle substitute insurance fees are extra, however, drivers concerned approximately depreciation can also need the coverage in case their new vehicle is totaled.

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