What It Is and Why You Need It
If you are involved in an accident that totals your new car, the insurance check may not be enough to buy a new car of the same make and model. Don't forget that a new car starts depreciating the minute you drive it off the dealership, and your insurance company will base their valuation of the car on its value just before the accident, and not its value at the dealership.
This means you will have to use your own money to top up the difference, and you may end up being without a car if you don't have the money. It's even worse if you bought the car on a loan, which means the financier still wants you to pay for the car you don't own.
It is these quandaries that have given rise to new-car replacement insurance policies. If you have a new-car replacement insurance coverage, and your new car is totaled, then your insurance company will buy you a brand new car of the same make and model. You just have to pay the deductible, which is normally a reasonable amount.
Here are two terms and conditions of new-car replacement insurance you should know about:
It's Only Offered on New Cars
Just like the name suggests, new-car replacement insurance coverage is only offered on new cars. Therefore, you may not be able to use it for a slightly old car even if it is an expensive model. The cut-off age is determined by each insurance company, so you can shop around to see what is available on the market and fits your car.
It Is Added to Comprehensive and Collision Coverage
New-car replacement article doesn't take the place of other forms of insurance; in fact, you can only buy it if you already have comprehensive and collision insurance coverage. This is necessary because the new-car replacement payout will only top up the difference, after your collision or comprehensive coverage payout, to help buy a new replacement car.
Who Needs It
You probably need new-car insurance coverage if:
You Have Financed a New Car
If you have a new car, you risk owing more on it than regular comprehensive or collision coverage can pay if it is totaled in an accident. Having new-car replacement coverage ensures that you won't have to pay for a car you don't own if it is totaled in an accident.
You Have a Car That Depreciates Fast
Cars don't depreciate at the same rate; some depreciate faster than others. You should buy new-car replacement coverage if you have a fast-depreciating car because you stand to lose a lot if such a car is totaled.
Use the above information to decide whether to buy new-car insurance coverage or not. don't forget to consult an auto insurance company, such as Crowel Agency, Inc., for further information.