New car replacement, is that an option?!

Last week’s blog, “Gap coverage, an important option to have,” examined an optional coverage that can be added to most car insurance policies.  Here’s a link just in case you missed it.    A new car loses 11% of its value the minute you drive it off the lot and 15% to 25% each year thereafter for the first 5 years.  GAP coverage can be a financial life saver.  While that’s helpful for your loan and your wallet, it doesn’t really get you a new car.

Enter new car replacement.  A few insurance carriers have raised the bar with new car replacement offerings.  New car replacement may be included as a standard part of the policy or it may be an option that’s added for an additional charge similar to GAP coverage.  In addition, some companies offer this only for the first year while others offer this for a specific time period such as three years.

The important thing is to ask your insurance agent, whether or not your company offers it.  If they don’t, send me an email at and we’ll let you know who does, even if our carriers don’t offer it!

How does new car replacement work?

  • This is typically available only on brand new cars
  • If the car is in an accident & considered a total loss, the car is replaced with a new one or the cash equivalent of a new one
  • The new one is typically only offered if the car you bought is totaled in the first year (12 months) of ownership
  • If the option goes beyond the first year, then the carrier typically pays a “cash equivalent” for your car such as what does a 2010 Honda Accord go for that was in roughly the same shape and mileage as the one you just lost
  • One carrier does offer a better car replacement option that sweetens the pot to include a car one model year newer & up to a specific mileage amount less

Depending on what version you get, here are four questions you need the answer to;

  • Does your company offer it
  • How long does it last
  • What is the cost
  • What are the stipulations (get them in writing)

And do remember, that this kind of coverage probably won’t negate your need for GAP coverage!  We recommend you keep that until the loan is paid off and then drop it.  Knowing what your options are is the first step to making informed decisions about what’s right for you and what’s not.

If you have a question, drop us an email, post it in our comments section or on our Facebook page.  We’ll get you an answer.

Evie Wise
Evie Wise


Evie Wise
Evie Wise

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