Guide to New Car Replacement Insurance (2024)
New car replacement insurance pays for the full cost of replacing your totaled vehicle with a brand-new one.
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Written byDanny Smith
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Licensed auto and home insurance agent
4+ years in content creation and marketing
As Insurify’s home and pet insurance editor, Danny also specializes in auto insurance. His goal is to help consumers navigate the complex world of insurance buying.
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Edited bySarah Archambault
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Experienced personal finance writer
Background working with banks and insurance companies
Sarah enjoys helping people find smarter ways to spend their money. She covers auto financing, banking, credit cards, credit health, insurance, and personal loans.
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Updated November 21, 2024
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Table of contents
New car replacement insurance is an optional type of car insurance that kicks in if you total your car. Unlike traditional car insurance, new car replacement insurance pays for the full cost of replacing your totaled car with a new version. Standard car insurance only pays for the actual cash value of your car, which depreciates as soon as you drive it off the lot.
If you have a loan on your car, new car replacement insurance can help you avoid owing more on your loan than what standard insurance would pay out. Here’s an in-depth look at new car replacement insurance, its benefits, and its alternatives to help you decide if it’s worth the extra cost.
Quick Facts
New car replacement insurance policies typically only apply to newer cars.
At five years, Travelers offers the longest window for new car replacement insurance.
Drivers typically pay around 5% of their total premiums for new car replacement insurance.
How new car replacement insurance works
New car replacement insurance is an optional type of car insurance that protects against depreciation by fully replacing your car in the event of a total loss. Standard car insurance policies typically pay out just the actual cash value of your car.[1]
Vehicles also depreciate quickly from the moment you drive them off the lot — as much as 20% in the first year, according to Kelley Blue Book data. New car replacement insurance is a way to prevent that value loss.[2]
For Example
If you total a $25,000 car after only one year, a standard insurance policy might only pay out $20,000. With new car replacement insurance, your insurer would pay out the full $25,000 so you can buy a brand-new vehicle. While new car replacement insurance is never a requirement, it’s often worth it for many drivers.
When new car replacement insurance makes sense
New car replacement insurance makes sense in various situations, including:
You own a new car
It’s a good idea for drivers with brand-new cars to consider new car replacement insurance. If you’re unlucky enough to total your new car within a year or two, you won’t have to bear the financial burden of fully replacing it.
You drive infrequently
Many new car replacement policies have mileage limits, often around 15,000 miles annually. People who don’t drive much may benefit from new car replacement insurance.
You drive a high-value vehicle
People with expensive cars that would be costly to replace should consider new car replacement insurance to avoid the hefty cost of replacing a brand-new, expensive vehicle.
Companies that offer new car replacement insurance
Some of the best car insurance companies, including State Farm, GEICO, and Progressive, don’t offer new car replacement insurance. But you still have plenty of reliable car insurance companies to choose from for new car replacement insurance.
Insurance Company ▲▼ | Details ▲▼ |
|---|---|
| Allstate | If the car is 2 years old or newer, Allstate covers the amount you need to get a brand-new car. |
| Travelers | Travelers replace a totaled car with a brand-new one in the first five years of ownership. |
| Liberty Mutual | Liberty Mutual offers new car replacement for vehicles less than 1 year old or with fewer than 15,000 miles. |
| Farmers | Farmers will cover the cost of replacing your vehicle with a new one if it’s 2 years old or less and has fewer than 24,000 miles. Coverage can vary by state. |
| Safeco | Safeco covers the replacement cost of a totaled car you’ve owned for less than one year. |
| American Family | American Family offers replacement coverage for brand-new vehicles up to the first renewal. |
| Nationwide | Nationwide offers new car replacement for cars totaled within the first three years of ownership. |
| The Hartford | The Hartford offers replacements for cars in the first 15 months or 15,000 miles. |
| Erie | Erie provides new car replacement coverage for cars less than 2 years old. |
| Shelter | Shelter offers new car replacement coverage for cars within the first year or first 15,000 miles. |
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Best companies for new car replacement insurance
While plenty of car insurance companies offer new car replacement insurance, a few stand out. Travelers, Nationwide, and Allstate offer some of the best new car replacement insurance policies.
Travelers: Best for longevity
| User Reviews | 4.7 |
|---|---|
| IQ Score The Insurify Quality (IQ) Score uses more than 15 criteria to objectively rate insurance companies on a one-to-ten scale. The Insurify editorial team researches insurer data to determine the final scores. | 9.0 /10 |
| Liability Only Liability-only insurance, sometimes called minimum-coverage insurance, pays for bodily injury and property damage to others in an accident the policyholder causes. It does not pay for the insured’s own damages. | $89/mo |
| Full Coverage Full-coverage car insurance generally includes liability, collision, and comprehensive coverage, and may include other optional coverages such as uninsured motorist coverage. Collision covers a policyholder’s repair or replacement costs in case of an accident. Comprehensive covers damages caused by non-accident events. The average quote displayed here reflects policies with the following coverage limits: $50,000 bodily injury liability per person; $100,000 bodily injury liability per accident; $50,00 property damage liability per accident; $1,000 collision deductible; and a $1,000 comprehensive deductible. | $191/mo |
4.7
Best choiceBased on 757 verified guest reviews and ratings
How drivers feel about Travelers
Drivers appreciate the lowest prices, excellent service, and responsive call centers but dislike the rising premiums and poor claims handling.
AI-generated from the text of verified reviews collected by Insurify
Best For
Numerous discounts
Gap insurance
Rideshare coverage
How drivers feel about Travelers
Drivers appreciate the lowest prices, excellent service, and responsive call centers but dislike the rising premiums and poor claims handling.
AI-generated from the text of verified reviews collected by Insurify
Best For
Numerous discounts
Gap insurance
Rideshare coverage
Reviews (389)
Nancy
November 18, 2024
Verified Review
Checking for Better Rate
Really good.
Jim
November 12, 2024
Verified Review
Typical
They were fair but within a month, they raised their premium by over $50.
Kenneth
November 5, 2024
Verified Review
Excellent
Excellent
JD Power
J.D. Power data measures overall customer satisfaction and claims satisfaction based on a 1,000-point scale.
829NAIC Index
Average amount of customer complaints relative to competitors on a 0-5 scale. A lower score represents fewer complaints.
0.94A.M. Best
A.M. Best analyzes an insurer’s financials, operating performance, business profile, and other factors to generate an opinion-based rating of a company’s financial and credit strength. Ratings range from A++ (exceptional) to D (poor).
A++Why we picked this company
Travelers offers one of the longest windows of any new car replacement insurance. It covers the cost of replacing your totaled vehicle with a new one for the first five years of ownership. But you must be the original owner of the car, and you’ll need to have both collision and comprehensive insurance for the coverage to apply.
Pros
Accident forgiveness available
Offers discount for hybrid and electric cars
A++ (Superior) financial strength rating from AM Best
Cons
Rideshare coverage not available in all states
High number of negative customer reviews with the Better Business Bureau
Higher-than-average number of complaints with the National Association of Insurance Commissioners
The Hartford: Best for people who don’t drive often
| User Reviews | 3.9 |
|---|---|
| IQ Score The Insurify Quality (IQ) Score uses more than 15 criteria to objectively rate insurance companies on a one-to-ten scale. The Insurify editorial team researches insurer data to determine the final scores. | 8.4 /10 |
| Liability Only Liability-only insurance, sometimes called minimum-coverage insurance, pays for bodily injury and property damage to others in an accident the policyholder causes. It does not pay for the insured’s own damages. | $95/mo |
| Full Coverage Full-coverage car insurance generally includes liability, collision, and comprehensive coverage, and may include other optional coverages such as uninsured motorist coverage. Collision covers a policyholder’s repair or replacement costs in case of an accident. Comprehensive covers damages caused by non-accident events. The average quote displayed here reflects policies with the following coverage limits: $50,000 bodily injury liability per person; $100,000 bodily injury liability per accident; $50,00 property damage liability per accident; $1,000 collision deductible; and a $1,000 comprehensive deductible. | $171/mo |
3.9
A solid optionBased on 1304 verified guest reviews and ratings
How drivers feel about The Hartford
Drivers appreciate the excellent customer service, ease of use, and affordability, but some are concerned about unexpected price increases.
AI-generated from the text of verified reviews collected by Insurify
Best For
Senior drivers
Bundling discounts
Customer service
How drivers feel about The Hartford
Drivers appreciate the excellent customer service, ease of use, and affordability, but some are concerned about unexpected price increases.
AI-generated from the text of verified reviews collected by Insurify
Best For
Senior drivers
Bundling discounts
Customer service
Reviews (740)
Arthur
November 19, 2024
Verified Review
Hartford is an Excellent Choice
Excellent
Theresa
November 18, 2024
Verified Review
Friendly
Informative.
Glenn
November 18, 2024
Verified Review
Consider Other Insurance Companies
After one year, the premiums jumped by $200.
JD Power
J.D. Power data measures overall customer satisfaction and claims satisfaction based on a 1,000-point scale.
837NAIC Index
Average amount of customer complaints relative to competitors on a 0-5 scale. A lower score represents fewer complaints.
0.84A.M. Best
A.M. Best analyzes an insurer’s financials, operating performance, business profile, and other factors to generate an opinion-based rating of a company’s financial and credit strength. Ratings range from A++ (exceptional) to D (poor).
NRWhy we picked this company
The Hartford’s new car replacement insurance policy offers drivers some flexibility with its new car replacement insurance. Drivers can get their totaled cars replaced within the first 15 months or 15,000 miles.
Pros
Savings for AARP members
Above-average customer satisfaction
Cons
Only available for AARP members
No accident forgiveness coverage
Allstate: Best for discounts
| User Reviews | 4.0 |
|---|---|
| IQ Score The Insurify Quality (IQ) Score uses more than 15 criteria to objectively rate insurance companies on a one-to-ten scale. The Insurify editorial team researches insurer data to determine the final scores. | 8.9 /10 |
| Liability Only Liability-only insurance, sometimes called minimum-coverage insurance, pays for bodily injury and property damage to others in an accident the policyholder causes. It does not pay for the insured’s own damages. | $61/mo |
| Full Coverage Full-coverage car insurance generally includes liability, collision, and comprehensive coverage, and may include other optional coverages such as uninsured motorist coverage. Collision covers a policyholder’s repair or replacement costs in case of an accident. Comprehensive covers damages caused by non-accident events. The average quote displayed here reflects policies with the following coverage limits: $50,000 bodily injury liability per person; $100,000 bodily injury liability per accident; $50,00 property damage liability per accident; $1,000 collision deductible; and a $1,000 comprehensive deductible. | $133/mo |
4.0
Best choiceBased on 5648 verified guest reviews and ratings
How drivers feel about Allstate
Drivers appreciate the initial pricing and overall service but dislike the frequent rate increases and misleading pricing tactics.
AI-generated from the text of verified reviews collected by Insurify
Best For
Accident forgiveness
Wide availability
Cheap rates
How drivers feel about Allstate
Drivers appreciate the initial pricing and overall service but dislike the frequent rate increases and misleading pricing tactics.
AI-generated from the text of verified reviews collected by Insurify
Best For
Accident forgiveness
Wide availability
Cheap rates
Reviews (3,073)
Rodney
November 20, 2024
Verified Review
Lower Insurance
The insurance is too high.
Lyudmila
November 14, 2024
Verified Review
No Discount for Seniors
The service is mediocre.
Latonya
November 12, 2024
Verified Review
Not Recommended
I would not recommend Allstate. They did not support me when I needed them most. They didn't believe me or the other party when we said my first accident wasn't my fault. My agent incorrectly reported to the DMV that my insurance had lapsed when it hadn't. They increased my insurance rates four to five times within two years. A representative from my agent's office called me to sell renters insurance, promising a lower monthly rate, which turned out to be false. After I was involved in a hit and run, instead of ensuring my wellbeing, they raised my insurance again to almost $800/month. I find Allstate to be a disappointing car insurance company and I wouldn't recommend them to anyone.
JD Power
J.D. Power data measures overall customer satisfaction and claims satisfaction based on a 1,000-point scale.
833NAIC Index
Average amount of customer complaints relative to competitors on a 0-5 scale. A lower score represents fewer complaints.
0.94A.M. Best
A.M. Best analyzes an insurer’s financials, operating performance, business profile, and other factors to generate an opinion-based rating of a company’s financial and credit strength. Ratings range from A++ (exceptional) to D (poor).
A-Why we picked this company
Allstate has a good new car insurance policy, replacing vehicles 2 years old or newer. But it also has numerous car insurance discounts that drivers can take advantage of on top of new car replacement insurance, including multiple policy, new car, safe driver, good student, and anti-lock brake discounts.
Pros
Ample opportunities for bundling discount
Offers a pay-per-mile option
A+ (Superior) financial strength rating from AM Best
Cons
Low customer satisfaction
Rates are merely average compared to other insurers
Below-average rank for customer satisfaction in many regions, according to J.D. Power’s 2024 U.S. Auto Insurance Study
Insurify selected the best car insurance companies by considering the quality, length, and flexibility of their new car insurance replacement policies, as well as available discounts.
Average cost of new car replacement insurance
Drivers typically pay around 5% of the cost of their total policies for new car replacement insurance. But costs can vary based on a number of things, including your coverage limits, age, location, and type of car. More expensive cars typically have higher costs.
These factors also affect the cost of your regular car insurance policy. Your credit history, mileage driven, and driving record can have a significant effect on your premiums. The state you live in can also have an effect on how much you pay for your new car replacement insurance.[3]
Benefits of new car replacement coverage
New car replacement insurance coverage can be hugely beneficial. For typically a small percentage of your policy’s premium, you can secure coverage that will fully replace a totaled car with a new one within a specific period (often one to three years).
If you never need to use the coverage, it’s typically not a huge wasted expense. For example, if your policy costs $100 per month and your new car replacement insurance costs 5% of your premium, you’ll only pay $60 extra per year.
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New car replacement vs. gap insurance
New car replacement insurance and gap insurance both offer payouts if you total your car, but they differ in how they make those payouts.
New car replacement insurance pays the full cost of replacing your car with a new one. Gap insurance pays the difference between the actual cash value of your car and the remaining balance you have on your car loan.[4]
New car replacement insurance makes sense if you have a newer car and drive it frequently since many new car replacement policies only cover newer vehicles. Gap insurance makes sense if you drive frequently and have to take out a significant loan for your vehicle.
Good to Know
If you owe more on your car loan than your vehicle’s actual cash value, gap insurance can be a good safety net. You can have both coverages at the same time for more thorough protection.
New car replacement vs. better car replacement
New car replacement insurance and better car replacement insurance both offer vehicle replacement if you total yours, but they differ in the type of vehicle they provide. New car replacement coverage pays for replacing your car with a brand-new version.
Better car replacement coverage typically replaces your car with one that’s one model year newer and sometimes with fewer miles. New car replacement insurance makes sense if you have a new vehicle that you drive frequently, as these policies often only apply to newer vehicles.
Better car replacement insurance makes sense if you drive a lot and own an older car, as it ensures you maintain vehicle value with a newer model replacement.
New car replacement insurance FAQs
If you’re still not sure whether new car replacement insurance is worth it, check out the additional information below about this type of coverage.
Is new car replacement insurance worth it?
New car replacement insurance is often worth it for new car owners. It helps you replace your totaled car with a brand-new one, often for only 5% of the cost of your standard auto insurance policy.
What does new car replacement mean in an insurance policy?
New car replacement in an insurance policy means your insurer will fully cover the cost of replacing your totaled car with a new version, rather than just paying you its actual cash value.
How long do you have to add a new car to your insurance policy with Liberty Mutual?
You typically have between seven and 30 days to add a new car to your Liberty Mutual insurance policy.
If someone else totals your car, does the insurance company pay for another one, or does it only cover the cost of the previous car?
In most cases, if someone else totals your car, their insurance company will pay out the actual cash value of your car at the time of the accident.
How do insurance companies determine a car’s value when totaling it out?
Insurance companies determine a car’s value when totaling it out by considering factors like its age, condition, and mileage to determine its actual cash value.
Sources
- Kelley Blue Book. "Actual Cash Value: How It Works for Car Insurance."
- Kelley Blue Book. "How To Beat Car Depreciation."
- Insurance Information Institute. "What determines the price of an auto insurance policy?."
- Insurance Information Institute. "What is gap insurance?."
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Danny Smith
Danny is a Brooklyn-based writer with a producer’s license for property and casualty insurance. A former editor at Insurify, he specializes in auto, home, and pet insurance. He works to translate his insurance expertise into digestible, easy-to-understand content for drivers, homeowners, and pet owners alike.
Edited bySarah Archambault
Experienced personal finance writer
Background working with banks and insurance companies
Sarah enjoys helping people find smarter ways to spend their money. She covers auto financing, banking, credit cards, credit health, insurance, and personal loans.
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