An Overview Of New Car Replacement Insurance

Insurance companies differentiate their services to suit different customers. For example, auto insurance companies have developed new car replacement insurance for owners of brand new cars. Below is an overview of this coverage.


New car replacement coverage has multiple benefits. First, you should know that most cars depreciate, but brand new cars depreciate faster than used cars. A brand new car loses some of its value the minute you drive it off the dealership's parking lot.

The depreciation means your standard car insurance might not replace your car should you lose it in an accident or theft. Don't forget that standard car insurance pays the car's actual cash value (its market value) and not its purchase value.

Consider an accident that totals your car a few months after purchase. If you don't have new car replacement coverage, the insurance compensation check might not cover the purchase price of a brand new, similar car. Some auto insurance companies take the insurance a notch higher and compensate you with a newer model.


Insurance companies have different eligibility requirements for new car replacement coverage. For example, many insurance companies restrict the coverage to:

  • Relatively new cars
  • Low-mileage cars
  • Original car owners (first owners)
  • Those who have comprehensive and collision insurance
  • Those who buy the coverage shortly after car purchase

The specific coverage or age limits vary by insurer. Consult your insurance agent for eligibility assessment. After that, purchase the insurance as soon as possible before you become ineligible for it.


Not every car insurance company offers new car replacement coverage. At the same time, many companies offer the coverage as an add-on and not standalone coverage. Thus, you should confirm whether your preferred insurance company provides the coverage you want before buying car insurance.

Who Needs It

Anyone can benefit from new car replacement coverage, but some people need it more than others. For example, you should consider the coverage if:

  • You have a high-end car (high-end cars tend to depreciate faster than standard cars)
  • You cannot afford to replace your car with a similar unit in case you lose it
  • You face a high risk of car theft or auto accident

Of course, you can also buy the coverage just for your peace of mind.

Review your insurance policy to determine if it provides the coverage that you need. Consult your insurance agent for further information on new car replacement coverage or other forms of auto insurance coverage. The agent will also help you compare quotes and buy the coverage.