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.

Danny Smith
Written byDanny Smith
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Danny Smith
  • 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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Sarah Archambault
Sarah 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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Updated November 28, 2024

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Rates shown are real-time Insurify user quotes from 100+ insurance companies and Quadrant Information Services data. Insurify’s algorithm excludes anomalous quotes and anonymizes personal details, then displays refined quotes by price, date, and insurer popularity up to 10 days ago from November 28, 2024. Actual quotes may vary based on the policy buyer’s unique driver profile.

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:

  • illustration card https://a.storyblok.com/f/162273/150x150/e80d4ae197/car-and-driving-96x96-gold_019-car.svg

    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.

  • illustration card https://a.storyblok.com/f/162273/x/c939068e05/miles.svg

    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.

  • illustration card https://a.storyblok.com/f/162273/150x150/e4caf71395/car-sharing-96x96-orange_040-shield.svg

    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
AllstateIf the car is 2 years old or newer, Allstate covers the amount you need to get a brand-new car.
TravelersTravelers replace a totaled car with a brand-new one in the first five years of ownership.
Liberty MutualLiberty Mutual offers new car replacement for vehicles less than 1 year old or with fewer than 15,000 miles.
FarmersFarmers 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.
SafecoSafeco covers the replacement cost of a totaled car you’ve owned for less than one year.
American FamilyAmerican Family offers replacement coverage for brand-new vehicles up to the first renewal.
NationwideNationwide offers new car replacement for cars totaled within the first three years of ownership.
The HartfordThe Hartford offers replacements for cars in the first 15 months or 15,000 miles.
ErieErie provides new car replacement coverage for cars less than 2 years old.
ShelterShelter 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 761 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 (393)

Natalie

November 26, 2024

Verified Review

Great customer service

Great customer service.

Ellen

November 25, 2024

Verified Review

Save on Car Insurance

I am looking to renew my car policy as I have moved from N.Y. to Texas.

Linn

November 25, 2024

Verified Review

Looking for a Better Rate

It has become too costly.
See all Travelers reviews
JD Power
J.D. Power data measures overall customer satisfaction and claims satisfaction based on a 1,000-point scale.
829
NAIC Index
Average amount of customer complaints relative to competitors on a 0-5 scale. A lower score represents fewer complaints.
0.94
A.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 1309 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 (744)

Wayne

November 27, 2024

Verified Review

You Asked For It

I've never had to file a claim.

Robert

November 27, 2024

Verified Review

Home Insurance with Hartford is Great

Great people, great service.

John

November 27, 2024

Verified Review

Overview of Auto Insurance Costs for 3 Vehicles

I wish my auto premiums were significantly lower than they are now. I'd prefer $150 per month instead of $250 per month.
See all The Hartford reviews
JD Power
J.D. Power data measures overall customer satisfaction and claims satisfaction based on a 1,000-point scale.
837
NAIC Index
Average amount of customer complaints relative to competitors on a 0-5 scale. A lower score represents fewer complaints.
0.84
A.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).
NR
Why 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 5662 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 (3,078)

Debora

November 25, 2024

Verified Review

Very Expensive for Automobiles

The representative was very nice, but the automotive insurance is too high.

John

November 25, 2024

Verified Review

Good

I've never had a problem.

Lisa D

November 25, 2024

Verified Review

Need Lower Insurance

It's very pricey. They indicate one quote while you're trying to shop around, and then the pricing goes up after signing on.
See all Allstate reviews
JD Power
J.D. Power data measures overall customer satisfaction and claims satisfaction based on a 1,000-point scale.
833
NAIC Index
Average amount of customer complaints relative to competitors on a 0-5 scale. A lower score represents fewer complaints.
0.94
A.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

  1. Kelley Blue Book. "Actual Cash Value: How It Works for Car Insurance."
  2. Kelley Blue Book. "How To Beat Car Depreciation."
  3. Insurance Information Institute. "What determines the price of an auto insurance policy?."
  4. Insurance Information Institute. "What is gap insurance?."
Danny Smith
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.

Sarah Archambault
Sarah 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.

Featured in

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