What is New Car Replacement Insurance?
In this blog, we explain what is new car replacement Insurance is and why it can be worth it. In the event of an accident, comprehensive / collision insurance will cover the current value of your vehicle. This means that if you bought a new vehicle and several years later you had an accident, your vehicle would be worth a lot less than what you originally paid for it due to depreciation. This comes as a surprise to many drivers, who pay insurance premiums year after year while the insurance company limits the claim amount as much as possible. Replacement cost insurance will cover you for the depreciated loss, meaning you get a brand no car and don’t have to be out of pocket.
New Car Replacement Insurance example
You purchased your vehicle used 3 years ago for $32,000. After 3 years of use, at an average depreciation rate of 10% per year, its current value is now $23,000. You really liked your car and have your eye on the brand-new model, which now costs $40,000. What will your insurance policy contribute?
If you only have collision / comprehensive insurance, your primary insurance settlement will be for the current value of your vehicle: $23,000.
If you purchased a New Vehicle Replacement Insurance policy, you would receive the additional $17,000 towards a new vehicle on top of the $23,000 so that you could purchase the new $40,000 vehicle using both settlements.
Why do I need this type of coverage?
We love new vehicles, but the reality is that they depreciate the second we drive off the dealership’s lot. What’s even worse is that this plays to the advantage of your insurance company, which now gets to pay less if there is a claim.
With New Car Replacement Cost Insurance you can get the true benefit of buying collision / comprehensive insurance by not having to pay the full loss of depreciation.
Other coverage benefits
Beyond simply covering the difference of depreciation, a New Car Replacement Cost Insurance policy in BC and Alberta with Obvi can also include a number of other different perks:
OEM Parts: Your existing collision/comprehensive insurance policy will pay to repair your vehicle after a partial loss with the cheapest available parts. These could be recycled parts from a scrap yard or aftermarket parts of lesser quality. OEM Parts pays the difference between the cost to repair with those parts and the cost to repair with brand-new parts from the vehicle manufacturer. Coverage until model year 5, $2,500 coverage per year, maximum $10,000 coverage per policy.
Partial-Loss Deductible Reimbursement: If you are charged a partial-loss deductible during the policy term, the policy will reimburse your deductible up to $500. Unlimited use throughout the policy term.
Rental Vehicle Reimbursement: If loss of use coverage is exhausted under your primary insurance policy due to a delay in repairs or replacement of the vehicle, the policy will reimburse the additional cost of a rental vehicle up to $50 per day to a maximum of $2,500 per year.
Lost or Stolen Key Fob Protection: If you lose your key fob during the policy term, we will pay to replace it. Coverage is one-time use per policy, up to $500.
Obvi is now offering New Car Replacement Insurance to drivers in British Columbia and Alberta, in addition to our extended warranty policies.