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Understanding New Car Replacement Insurance

At O1ne Mortgage, we aim to provide you with the best financial advice and services. If you have any mortgage service needs, call us at 213-732-3074. In this article, we will explore the intricacies of new car replacement insurance and how it can benefit you.

How Does New Car Replacement Insurance Work?

New car replacement insurance reimburses you for the cost of buying a brand-new version of the same make and model of your vehicle if it’s totaled, minus your deductible. This type of insurance helps protect against depreciation, provided your insurance company offers it and you meet the eligibility criteria.

Eligibility Criteria

• You must be the original owner.
• Your vehicle must meet the insurer’s age and mileage requirements.
• You must purchase coverage within the insurer’s specified timeframe.
• You must maintain comprehensive and collision coverage on your vehicle.

New Car Replacement vs. Gap Insurance

Gap insurance covers the difference between your car’s depreciated value and what you owe on your loan or lease. It is useful if your car is declared a total loss and you owe more than its worth. However, gap insurance won’t help you buy a new car, whereas new car replacement insurance will.

New Car Replacement vs. Better Car Replacement

If your car is too old or has too many miles to qualify for new car replacement coverage, better car replacement can help. This coverage pays to replace your totaled car with a newer version of the same make and model, usually one to two years newer, depending on the insurer.

What Happens if Your Car Is Totaled?

If your car is totaled, the insurer typically writes you a check for its value at the time of the accident. Without new car replacement coverage, this amount may not cover the cost of a new car due to depreciation. With new car replacement coverage, the insurer will pay you enough to get a brand-new version of the totaled car.

Cost of New Car Replacement Insurance

The cost of new car replacement insurance varies based on factors such as the car you drive, your location, driving history, age, and more. Rates also differ among insurers, so it’s wise to shop around and compare multiple quotes.

Insurance Companies Offering New Car Replacement Insurance

Here are some insurance companies that offer new car replacement insurance. Availability may vary by state, so contact the provider to confirm:

• Acuity: Available for cars no more than two model years old.
• Allstate: Available for cars two years old or newer.
• American Family: Available for cars no more than one year old.
• Amica: Available for cars less than one year old with fewer than 15,000 miles.
• Cincinnati: Available within 30 days of buying your car if it has fewer than 1,000 miles.
• Erie: Available for cars two years old or newer.
• Farmers: Available for cars two years old or newer with 24,000 miles or less.
• Liberty Mutual: Available for cars less than one year old with fewer than 15,000 miles.
• Safeco: Available for original owners with cars less than one year old with fewer than 15,000 miles.
• Shelter: Available for cars bought in the past 12 months with fewer than 15,000 miles.
• Travelers: Available during the first five years of ownership for current or future model year vehicles.

Is New Car Replacement Insurance Worth It?

New car replacement coverage can provide peace of mind, but you must decide if the added cost is worth it. Consider the following:

• How much will coverage cost?
• How quickly is the car expected to depreciate?
• Do you have an auto loan to repay if your car is totaled?
• Can you afford to replace your vehicle without this coverage?

Some insurers automatically remove this coverage when you’re no longer eligible. If yours doesn’t, set a reminder to cancel it when the insurer will no longer cover the loss.

The Bottom Line

New car replacement insurance helps protect against depreciation but may not be right for everyone. If your car maintains its value well, you might skip the extra coverage. However, if it depreciates quickly, it may be worth the added cost. Use a vehicle valuation website to estimate how quickly your car’s make and model depreciate to make an informed decision.

For any mortgage service needs, call O1ne Mortgage at 213-732-3074. We’re here to help you make the best financial decisions.

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