THURSDAY, FEBRUARY 8, 2024
There are some situations where a driver may buy a car and suffer a significant accident right away. This can create a very financially devastating situation. Some auto insurance companies offer a feature called new car replacement coverage. It may help to minimize financial loss in these situations. Is it worth switching your coverage to get this protection? Here’s a closer look at what it is.
What Does New Car Replacement Coverage Do?
Some auto insurance companies offer this as an option. If your vehicle is under a year old and under a specific number of miles, for example, under 15,000 miles, the insurance company will help you to replace it with a new car if it suffers damage or a total loss.
Let’s say you are in an accident that totals the car a few months after buying it. Typically, the car insurance policy would pay you up to the value of the car. Yet, new cars depreciate significantly in the first year. That means you could receive a smaller amount for the car than what you owe to your lender. With new car replacement, it does not pay the depreciated value of the car. Rather, it replaces it with enough money to buy a new car for you.
When Should You Consider This Coverage?
Not everyone will benefit from new car replacement coverage. It can be an expensive addition to some policies. However, it is best for those who have a vehicle that they do not drive much, is brand new (under a year old), and has a loan, not a lease.
It can also benefit those who do not have a loan on the car but who bought it outright. Coverage can make sure you don’t have a full monetary loss just because the vehicle disappears.
What Happens If You Need Coverage?
If you are in an accident, you can appreciate the value of new car replacement coverage. You’ll get the amount of money you need to buy the same model year for the vehicle that the insurance company totaled. You do not have to worry about buying a new car that is not worth the same as the current vehicle you have or face financial loss.
Talk to your car insurance company about your need for new car replacement. If you are buying a brand new car, this coverage, or GAP auto insurance, tends to be an ideal investment for you. Discuss the options with your agent before buying a policy.
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