Have you heard your insurance company talking about car replacement assistant or new car replacement coverage? Well, you’ll hear this when you buy a new car.
Your new car is a great achievement – whether you’re replacing your old car or buying for the first time – and you’d not want to lose it. But what if you bought a car and a day, week, or month later, you get involved in an accident? Will you write your car off and count your losses?
Before you happily drive your new car off the dealer’s lot, you may want to consider car replacement assistance coverage.
In this article, you learn what car replacement assistance is, its costs, its comparison with other policies, and whether it’s worth it or not.
What Is Car Replacement Insurance?
Your new car might have been expensive or cost you a lot, it immediately depreciates as soon as you take it off the lot. Generally, cars can lose up to10% of their value in the first few months and over 20% value in the first 12 months.
Is a 5% increase in your total car insurance cost worth it?
If you’re unfortunate and crash your car shortly after you purchase it, insurers will value your car for less than its purchase price in addition to the depreciation. This is where the car replacement assistance comes in.
To ensure you don’t get stuck and strain to pay the price of a new car after your car is totaled, insurers today offer car replacement assistance. Some insurers call it new car replacement insurance.
It is evident that car replacement assistance is an essential add-on to your car insurance coverage.
How Does Car Replacement Insurance Work?
If you have car replacement assistance, and your car gets totaled, the insurer will buy a new car of the same make and model instead of just giving you money for the depreciated value of your totaled car. But the money will be less your insurance deductible.
However, details of car replacement assistance vary by insurance agency or company.
Generally, a car replacement assistance covers the total cost of replacing your totaled car (less deductible) when you encounter a covered loss. But for you to qualify for a car replacement assistant, you have to fulfill certain conditions, such as:
- Your car needs to be new – 2 years old or newer from the manufacturing date
- You also need to carry comprehensive and collision insurance coverage
- Your car is not leased. You must be owning the car
- You agree with your insurer that the coverage applies under a limited time (e.g., 1-2 years) and mileage (e.g., 15,000 or less)
- You agree to pay extra insurance deductibles
Car Replacement Assistant vs. Gap Insurance
You cannot combine New car replacement insurance with gap insurance because they’re almost similar. Each of these add ons helps to cover the difference between your car’s actual cash value – with depreciation – and its original value.
If your car totaled because of an accident, or any other covered loss, gap insurance covers the difference between the remaining balance of your car loan or lease amount and the car’s actual cash value. Gap insurance ensures that you do not have any outstanding loan or lease amount on your totaled car.
Note: Gap insurance is usually more readily available and easy to find than car replacement assistance.
Car Replacement Assistant vs. Better-Car Replacement
Some insurance providers offer a policy called better-car replacement. Again, not all insurance companies offer a better-car replacement policy because, like car replacement assistance, it is an add-on policy.
If your car is not new, you may not have access to car replacement assistance coverage. But if you may still want that form of coverage, it is worth considering “better-car replacement” policy. However, its compensation model is slightly different.
The better car replacement coverage will give you a new car with a newer model year than the totaled one. This is why it is called the “better car” replacement policy.
Before opting for a better-car replacement policy, talk to your insurance agent to give you a better understanding.
How Much Does Car Replacement Assistance Cost?
The cost of car replacement assistance varies by the insurance provider. Not all providers offer car replacement assistance coverage. In addition, it is not offered in some states as well.
Insurance providers don’t usually put the cost of car replacement assistant upfront. However, most companies estimate that it can be somewhere in the range of 5% of your car’s insurance’s total cost. But, this may also vary by the insurance company.
In addition, the same factors that affect your car insurance coverage will affect the cost of your car replacement assistant, for example:
- Your past driving record
- Your location or state
- Your age
- The type or model of the car you’re insuring
- If you’re leasing the car, bought the car on financing, or if you own the car, etc.
Since each insurance company has its own pricing structures, you may consider comparing different policies from different companies before settling on one. You may also consider talking to your insurance agent for better advice.
Is Car Replacement Assistant Worth It?
Whether car replacement assistance is worth it or not depends on why you’re buying it.
If you’ve purchased a new car, then a car replacement assistance is worth considering. Apart from depreciation, you’ll be covered in case you get involved in an accident within the next two years.
Otherwise, you can consider the following elements when gauging the value of car replacement assistance coverage:
- How much will car replacement assistance cost?
- What’s the value of your car after depreciation?
- Is there a likelihood of your car being totaled?
- What’s your ability to afford or purchase a new car if your car is totaled?
Before you buy a car replacement assistance coverage:
- Get different quotes to compare the costs of car replacement assistance coverage, and choose the cost that most benefits you.
- Understand the policy and insurer’s terms and conditions for coverage. Depending on the provider, car replacement assistance may be available for a few years than gap insurance. This might affect your cost calculations, especially if you have a loan.
While car replacement assistance might cost extra, it is worth the peace of mind you’ll get. Basically, you’ll drive your car in peace without worrying about its depreciation if it gets totaled. Whether car replacement assistance coverage is worth it or not is a decision you should make.
Note: If you purchase a car replacement assistance coverage, make sure you cancel it as soon as your car is over the set mileage or age limit specified by your provider. Otherwise, you may continue to pay for expired coverage.
If you look carefully, there is peace of mind that comes with a car replacement assistant. But only if you can afford it. For the period of coverage, you won’t need to worry about your car’s depreciation in case it is totaled. You won’t also worry about how you’ll afford a new car. It is a policy worth considering if you can afford it. If you can’t you can check the available alternatives to keep you covered.