What Should You Consider When Buying New Car Replacement Insurance?
Automobile replacement insurance is a unique product. Vehicles depreciate over time, and few drivers can afford to buy a brand-new automobile after suffering a write-off. The value of replacement insurance in the event of a total loss is undeniable.
New car replacement insurance can vary greatly in cost, however, and there are options about what kind of coverage to purchase. For many automobile owners, the goal is to find the best value for the price.
To help you better understand this topic and avoid paying too much for your coverage, let’s take a look at the options available for car replacement.
This option allows you the flexibility of obtaining coverage year over year. You purchase one year of coverage at a time, and then at the end of the year, you can choose to renew for another year or to let the coverage lapse.
The downside to this option, however, is that if you keep your coverage for 3, 4, 5, 6 or 7 years, the total that you will end up paying will be much higher than if you would have purchased a multiyear policy from the beginning. The upside: if you have a claim in Year 2, you would have paid much less for the policy by going year-to-year, and you get to pay monthly.
These are easily the policies that offer the best value. By agreeing to a multi-year policy right at the start, you get a significant discount on the total cost of your premium. If you know right away that you want multiple years of coverage for your vehicle, this option is a no-brainer.
Replacement insurance from your existing auto insurer
More and more insurers are offering a replacement cost rider with your collision and comprehensive coverage. While adding this kind of coverage to your existing primary insurance seems convenient, it comes at a high cost.
How? Premiums are set very low in the first year, to entice people to buy, but they increase significantly year over year. The cost of your policy for Year 5 will be a lot higher than the cost of your policy for Year 1.
So, why should someone buy a multi-year policy from an independent company instead of their existing insurance? Let’s have a look at what can happen if you don’t:
- Coverage is only eligible from the existing insurer when the vehicle is new, so if you switch insurance providers in Year 3 you could lose the replacement endorsement
- The premium charged for Year 3/4/5/6/7 is significantly higher than Year 1 or 2, and you have no way of knowing what it will look like
- What if your auto insurer non-renews your auto insurance or you find a better deal? A 3 year-old vehicle might not be eligible for replacement when it is no longer new
- What if your auto insurance becomes increasingly expensive while you carry collision and replacement with the same carrier?
Visit Obvi’s page for New Car Replacement Insurance to learn more or request a quote.