New Car Replacement

By: Denise Koslowsky
















By now we’re pretty sure you’ve seen or heard the ads offering you a brand new car if yours is totaled in an accident.  Who doesn’t love the idea of getting behind the wheel of a new, better car after you’ve suffered the loss of your current one?  So the question comes down to this…

Is this type of coverage for real?  Is it worth considering?

This blog is going to spend a few moments attempting to answer those questions.  We want you to understand what new car replacement insurance is all about and help you to know just what you are paying for.

Defining New Car Replacement Coverage
There are a few insurance carriers that offer coverage of this type.  They each call it by various names like; New Car Replacement, Better Car Replacement, Premier New-Car Replacement, Your Choice Plan.  And they each have variations to the restrictions.  But the basic way they define the coverage is this:  When your car is totaled, you won’t get a check for the value of your car, you will instead receive a replacement car that is the same make and model as your old car and in some cases it will be a year newer and with fewer miles.

The Restrictions
As with any coverage, there are restrictions.  In this case some of them can be rather limiting, as detailed below.

  • New Means New

While the definitions vary, you will likely be the cars first owner.  In general the car cannot be older than two or three model years.

  • Time’s Up

Because your car is only considered new for a short period of time, the new car coverage typically expires when the car is no longer considered new.

  • A Total Loss
    This means that at the time of the accident the insurance adjuster must declare your car a total loss e. it is beyond repair, in order to receive your new car.
  • New Car, Same Car
    You love your new car but what if after driving it for a while you realize that a different model would be better for your lifestyle? With this type of coverage in place, you are out of luck.  Your replacement car will be the exact same car in a newer model.
  • If It’s Available
    If you are leasing a vehicle, or live in certain states, new car replacement may not be available to you.

It’s Gonna Cost You
New car replacement coverage is not cheap.  The carriers that offer it, charge you dearly for the policy. It is pretty difficult to give you an exact cost because the price of the plan is based partially on your age, where you live, your driving record and the type of car you are insuring.  Estimates range but you can expect to pay between 15 – 40% above a basic plan.

The Bottom Line
In the end, you’ll need to weigh all these restrictions against other options to see if it is really worth it but there are two more really important factors you should know.

First, if you own your car outright, you are in a bad accident but the car is not totaled, the value of the car is now significantly diminished.  If you have been paying into a New Car Replacement Policy and your car is not a total loss, you might be paying a very high premium when you would have been better off with an elite insurer who pays significantly better at the time of a loss.

Second and most significant, the new car replacement coverage hinges on your car being totaled.  A car is commonly totaled at 75% of its value. (meaning that the cost to repair the vehicle exceeds 75% of the value of the car.)  The elite carriers that we work with at Advocate Brokerage work with a car being totaled at 50% of its value (and sometimes that number is even less.)

We are all about providing the kind of information that educates each client we serve. If you wonder about new car replacement and if it might be something to consider, give us a call at 914-723-7100.  We would love to talk you and there is never any cost or obligation for an automobile insurance review from Advocate Brokerage.  The results may surprise you.

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