New car replacement insurance

You could be due a brand-new vehicle after a theft or write-off.

Updated

A shiny new car straight from the showroom floor can be an attractive target for thieves. Fortunately, if you have comprehensive car insurance, you could be entitled to a brand-new replacement if your car is written off or stolen within months of becoming yours.

How does new car replacement work?

New car replacement is a type of coverage that’s included with some comprehensive coverage policies. If yours doesn’t include it, it’s also available as a policy add-on. You can learn about the different levels of car insurance coverage here.

Under most policies for new car replacement, if your brand-new vehicle is stolen or declared a total loss, it’s replaced with another new vehicle of the same make and model. Unlike standard comprehensive coverage that pays to repair or replace your vehicle, new car replacement also covers the cost of car depreciation.

Compare insurers that offer this perk on your policy or comprehensive coverage for free or an extra fee.

Am I eligible for new car replacement?

Eligibility will vary slightly by insurer, but expect to meet basic requirements:

  • You must be the first registered owner of the car.
  • You may be eligible if the vehicle was a registered dealer demo.
  • If you purchased your vehicle with a car loan, your lender may need to give permission replacement.
  • Your car must meet your insurer’s age and kilometre restrictions.
  • Your car must be damaged enough to need a replacement, rather than repairs.
  • If stolen, your car must be declared a total loss or non-recovery within your insurer’s required timing — for example, within 14 days of the date it was stolen.

What happens after my car is replaced?

The process varies by insurer. In some cases, your insurance company transfers your policy to the new vehicle. With others, your coverage ends and you must obtain a new policy for your replacement car. Carefully read your policy’s terms and conditions to avoid any surprises down the road.

In most cases, your vehicle is replaced with one that’s as close to your current model as possible:

  • Same make, model and series. The replacement car will be like the current version of the car you insured.
  • Accessories and modifications included. If you loaded your new car with expensive optional extras, most insurers agree to provide you with a replacement vehicle that has the same modifications.

    What are the limitations of new car replacement insurance?

    Here too, limitations vary by insurer. But you’ll likely need to meet further requirements that relate to your car, your policy and how it was damaged beyond repair:

    • As soon as your car passes your insurer’s kilometre or age threshold, your insured value plummets, and the replacement car you receive won’t be worth as much as when you bought your new car.
    • Your insurer might say its unable to find a similar replacement car. In that case, you can search for a replacement vehicle yourself — and your insurer must honour it.
    • You might not be covered for extended warranties you purchased for the original vehicle.
    • A basic deductible often applies, but some insurers waive it if your car is written off in an accident you aren’t at fault for.
    • Some insurers stipulate a maximum weight limit for the vehicle to be eligible for new car replacement.
    • Fires, floods, theft and larceny may not be covered.

    What are the alternatives to new car replacement?

    If you’ve grown attached to your car and want to be sure you can drive it — or one like it — for as long as you can, you’ve got options when it comes to protecting it:

    • Agreed-value car insurance. Even if your car isn’t yet 2 years old, you might not be eligible for new car replacement if you aren’t the first registered owner. However, you can estimate how much a new replacement vehicle will cost and negotiate an agreed value to cover it with your insurer.
    • Better car replacement. Some providers offer better car replacement, which replaces your current vehicle with a newer model that has less kilometre.
    • Gap insurance. After an accident or theft, your insurance policy might not cover the full value of your vehicle — a problem when you’re still paying off a loan and you’re left repaying on a vehicle you can’t drive. Gap insurance is designed to cover the gap between your payout and payments if your car is stolen or damaged beyond repair.

    Bottom line

    Combining your third-party liability protection policy with collision and comprehensive insurance can help improve your coverage, but may not fully cover the cost to replace your vehicle. New car replacement insurance is a type of coverage that pays to replace your vehicle after a total loss, including the cost of depreciation. So instead of getting a vaguely similar vehicle, you’ll get the same make and model. Get quotes from multiple providers to find a policy that can cover your new vehicle, then compare your options to get the best value.

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