New Car Replacement Insurance
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New car replacement coverage is available for brand-new cars. If your car is totaled in an accident within a few years of buying the car, new car replacement insurance will pay the full replacement cost of the same make and model.
New car replacement coverage is usually limited to drivers with collision and comprehensive coverage. It's also only available for brand-new cars. And you have to add the coverage to your policy shortly after you buy it.
The typical cost of new car replacement coverage is about $300 per year. But the price you'll pay depends on the car and insurance company. American Family Insurance had the best prices for new car replacement coverage, with an average annual rate of just $96.
What is new car replacement insurance?
Most new cars start to lose value (depreciate), as soon as you drive them off the lot. So if your new car is totaled in a crash or stolen weeks or months after you buy it, your insurance won't cover the full cost of the same vehicle new. You'll only receive the value of your car at the time of the crash, minus your deductible. This is because comprehensive and collision only cover the actual cost value, or ACV, which factors in depreciation.
New car replacement insurance makes up the price difference between your depreciated model and a brand-new car.
Some insurance companies take new car replacement coverage a step further and may pay for a newer model year than the one you previously owned, making it extra appealing.
How much does new car replacement coverage cost?
New car replacement coverage is about $300 per year but varies by insurance company and car model.
The cheapest company for new car replacement coverage is American Family Insurance, at around $98 per year — 68% cheaper than the average rate of the companies surveyed.
Company | Price of new car replacement coverage | |
|---|---|---|
| American Family Insurance | $98 |
| Nationwide | $168 |
| Erie | $237 |
| AAA | $254 |
| USAA | $294 |
Surprisingly, a cheap car insurance policy doesn't guarantee an affordable new car replacement coverage rate. A Farmers Insurance policy without new car replacement was the least expensive. But adding new car replacement coverage increased their rates by more than 70%. The most from any other company was just 17%.
The price you'll pay for coverage depends on the type of car you buy, too. In general, a more expensive vehicle will cost more to protect.
Model | MSRP | Cost of new car replacement coverage |
|---|---|---|
| Honda Civic | $22,350 | $255 |
| Hyundai Santa Fe | $27,700 | $264 |
| Ford F-150 | $30,495 | $306 |
| Mercedes GLC 300 | $43,850 | $296 |
| Tesla Model 3 | $46,990 | $397 |
Besides being more expensive, higher-end cars also depreciate faster. A Tesla Model 3 totaled after one year will generally lose more value than a Honda Civic would, meaning your insurance company would have to pay you more.
Is new car replacement coverage worth it?
New car replacement coverage is nice to have but not needed, since it only pays the difference between the cost of a new car and the value of the one you had. But it may be worth the peace of mind you'll get from protecting your investment.
Buying new car replacement insurance will depend on how much risk you're willing to tolerate and how much you're willing to pay to protect yourself. When deciding whether to add replacement coverage, consider:
- If your car is likely to be totaled in an accident
- How quickly your car is depreciating — newer and more expensive cars depreciate faster, making replacement coverage a greater value
- Whether you can afford to replace your car without this coverage
- The amount your insurance company charges for coverage
Ultimately, the best way to determine whether new car replacement is worth it is to ask yourself if the peace of mind justifies the additional cost. With new car replacement coverage, you'll be able to enjoy your new car without worrying about what would happen if it were totaled.
Which companies offer new car replacement?
New car replacement insurance is available from many companies, but not all. Among the 10 most prevalent insurance companies in the United States, new car replacement coverage is available at:
- Allstate
- American Family Insurance
- Farmers
- Liberty Mutual
- Nationwide
- Travelers
- USAA
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New car replacement coverage eligibility
The difference between your car's actual cash value (ACV) and replacement cost only grows over time, so most companies limit how long they'll provide replacement coverage. The restrictions vary by company but typically include a maximum age and mileage. You're also usually required to buy comprehensive and collision coverage to qualify for new car replacement insurance.
Insurance company | Eligibility requirements |
|---|---|
| Allstate | Car must be 2 model years old or newer |
| Farmers | Car must be newer than 2 model years old and have fewer than 24,000 miles |
| Liberty Mutual | Car must be less than 1 year old and have fewer than 15,000 miles. Older cars are eligible for "better car replacement," which provides a car 1 year newer, with 15,000 fewer miles than yours had before the accident. |
| Nationwide (through Allied) | Car must be newer than 3 years old |
| Travelers | Car must be less than 5 years old, and you must be the original owner |
| USAA | Pays a flat 20% of car's ACV; no vehicle age restrictions |
New car replacement vs. gap coverage
Gap coverage insurance is available to drivers who have a lease or loan on their vehicle. New car replacement and gap coverage both help make up the difference between the ACV of your car and the replacement cost if it's totaled.
However, gap coverage only pays off your lease or loan amount, so you won't owe money on a car you no longer own. New car replacement goes a step further and pays the entire replacement cost of a new vehicle equivalent to the one you had.
If you were in an accident and the car were totaled, your collision coverage would pay what the car is worth: $20,000, minus your deductible.
New car replacement coverage would pay for an identical brand-new car: at least an additional $5,000.
Gap coverage would only cover the difference between what collision pays and what you owe: $2,000. You wouldn't have a car, but you wouldn't owe any money on your car loan, either.
Gap insurance is more commonly available than new car replacement. It's offered by Geico, Progressive and State Farm, none of which provide new car replacement insurance.
If you are buying a new car and your insurance company doesn't offer new car replacement insurance, consider adding gap coverage instead if you want to stay with them
Methodology
To understand the cost of new car replacement car insurance, quotes were collected from seven major insurance companies that offer the coverage: AAA, American Family Insurance, Erie, Farmers, Nationwide, Travelers and USAA.
The analysis used insurance rate data from Quadrant Information Services. These rates were publicly sourced from insurance company filings and should only be used for comparison.
Editorial Note: The content of this article is based on the author's opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.