New Car Replacement Insurance in 2025 (In-Depth Explanation)

New car replacement insurance is an add-on coverage that offers drivers financial reimbursement for a brand-new vehicle of the same make and model if their car is totaled, ensuring complete value protection against depreciation.

Company requirements vary, but most require that the vehicle is no older than a year and that you carry full coverage. With rates starting at $5 per month, it shields car owners from the steep loss in value that typically happens during the first year.

Perfect for new vehicle owners worried about depreciation, this coverage helps avoid large out-of-pocket costs with recoverable depreciation.

Make sure to compare policies from different insurers to secure the most competitive rate and the optimal protection for your vehicle. Get fast and cheap auto insurance coverage today with our quote comparison tool.

How New Car Replacement Insurance Works

What is new car replacement insurance? New car replacement pays to replace your brand-new vehicle if it’s totaled in a collision within the first year of ownership. Assuming you paid around $35,000 for a new SUV, new car coverage would replace it with the same SUV or a similar make and model at the same price.

Most auto insurance companies only offer new car replacement insurance to vehicles no older than a year.

Nobody wants to think that their brand-new automobile could be written off so soon after they buy it. But if it does, new car replacement coverage will provide you with a larger reimbursement. What insurance companies offer new car replacement? Take a look below to see which car insurance companies offer this add-on coverage.

New Car Replacement Insurance Terms by Provider

If you don’t have insurance for new cars, you would only get the current actual cash value of the vehicle, which will be significantly less than what you paid for it.  While shopping for car insurance, specifically when replacing a new car, remember that depreciation is a very important factor that usually is missed in the buying process.

Read More: Buying Auto Insurance for a New Car

To see what average rates are for new car replacement, from State Farm new car replacement insurance to Travelers replacement coverage, take a look at the table below.

New Car Replacement Insurance Cost by Provider

These rates will be added to the cost of your full coverage insurance policy at your company. If you total your car, having new car replacement coverage means the company will pay you for the full value of your new vehicle, not the depreciated value. Each insurance company uses its own formula to calculate a totaled car value.

Still, you can compare a repair bill to average market values to get an idea of what you can expect from a payout. Read our guide to using a totaled car value calculator to get a better idea of the value of your totaled vehicle.

Here are a few insurance providers who provide insurance for the purchase of new cars if your automobile is totaled within the first 15 months or 15,000 miles:

• Allstate: If the new automobile is less than two model years old, Allstate’s new car replacement insurance will replace it.
• Erie: Erie’s New Auto Security program will replace vehicles older than two years with the most recent model. Learn more in our Erie auto insurance review.
• Liberty Mutual: Liberty Mutual pays for a brand-new vehicle if your totaled car is under a year old and has fewer than 15,000 miles on it.
• Nationwide: Nationwide new car replacement pays to replace an automobile as long as it is less than three years old.
• Travelers: New car replacement insurance with Travelers will pay to replace your car with a brand-new vehicle of the same make and model if it’s totaled within the first five years of ownership.

Not all insurance companies provide new automobile replacement insurance. For example, Geico does not offer Geico new car replacement insurance. Companies that do offer it may not offer it in all states.

That’s why it’s imperative to shop around with multiple companies to find one with the coverage options you’re looking for.

Drivers Who Benefit From New Car Replacement Insurance

Do you need car replacement insurance? Although new car replacement insurance is more expensive, drivers concerned about depreciation may need auto replacement protection to be covered in the event their new vehicle is totaled.

Is new car replacement insurance worth it? If you own your car, you should consider buying a new car replacement if your car is new. 

Learn More: How Vehicle Year Affects Auto Insurance Rates

What is considered a new car for insurance? A vehicle must meet the following requirements at most companies:

• Is less than one year old
• Has fewer than 15,000 miles
• Was purchased new (not pre-owned)

Not everyone will need car insurance with new car replacement, but it’s worth considering if one of the above situations applies to you. If you drive fewer than 10,000 miles annually, you may also want to consider pay-per-mile insurance. Let’s go over a few general guidelines on insurance for new cars before you buy new car replacement coverage.

Regulations for New Car Replacement Insurance

Replacement car insurance for new vehicles is only available to drivers who own their vehicles and carry full coverage auto insurance. You may also have a deadline for buying new car replacement coverage from a particular insurance company. 

For instance, Nationwide mandates that drivers get insurance with new car replacement within six months after purchasing a new car, while Erie allows drivers to add coverage at any time as long as it’s before an accident.

Remember that the insurance company determines the period and mileage for new car replacement coverage. It’s also possible that you can’t purchase both gap insurance and new automobile replacement coverage simultaneously.

Advantages of Buying New Car Insurance Replacement Insurance

Essentially, for the monthly cost of the replacement value car insurance, you receive peace of mind knowing that if something happens to your new car, your insurance company will pay to replace it with the same or similar make and model (Learn More: Auto Insurance Rates by Vehicle Make and Model).

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Other advantages that come with new vehicle replacement insurance include the following:

• Your vehicle is protected throughout the first year of ownership.
• You won’t have to worry about replacing your totaled vehicle with an older, less expensive model.
• You can avoid the financial loss brought on by owing more on your car than it is worth.

While better car replacement doesn’t cover an auto loan, it can get you back behind the wheel of your new car without you paying out of pocket for another vehicle.

New Car Replacement Insurance vs. Gap Insurance

Unlike new car replacement, gap insurance pays the difference left on your auto loan or lease if your car is totaled in a collision or unrecoverable after a theft.

Keep these differences between new vehicle replacement vs. gap insurance in mind as you shop for a policy:

• Be sure you are aware of the terms and restrictions before purchasing gap insurance or a new car replacement policy.
• If you have an auto loan, gap coverage may be offered longer than new car replacement coverage, depending on the insurer.
• If you choose to forego gap or new car replacement coverage, be sure to have enough money saved up to pay back a lender or use it as a down payment on a replacement vehicle if your new car is totaled.
• If you decide to purchase new car replacement insurance, make sure to terminate it as soon as your vehicle reaches the maximum age or miles allowed by your insurer.

Before buying a new car, consider replacement or gap insurance.

Taking the time to shop around can help you find the most competitive rates and comprehensive coverage. Be sure to review policy details carefully to ensure it fits your specific needs.

New Car vs. Better Car Replacement Coverage

Replacement coverage might not be available to you if your automobile is older. However, some companies provide “better car replacement” or “newer-car replacement” plans, including:

• Erie
• Hanover
• Liberty Mutual

For example, Liberty Mutual offers better car replacement coverage as an optional add-on, which pays for a car that’s one model year newer and has 15,000 fewer miles. Any car, regardless of age, can use it. Read our Liberty Mutual auto insurance review to learn more.

Factors That Influence the Cost of New Car Replacement Insurance

Auto insurance rates by state, driver, and vehicle vary.  Newer vehicles also cost more to insure because they are more expensive to repair. On average, you can expect your car insurance rates to go up around 5% with new car replacement.

Some insurers, such as Concord Group and Shelter, offer new car replacement as part of standard coverage, but it is typically an add-on with most larger insurance companies. Comparing quotes from insurance companies is the only way to determine your exact new car replacement insurance rates.

Here are a few things to think about when deciding if new vehicle automobile replacement insurance is right for you:

• Budget: You might want only to carry your state’s minimum insurance to keep your auto rates as low as possible, but bear in mind that you run the danger of having your car totaled in an accident.
• Possibility of an Accident: If you work from home or do not drive very often, you are less likely to be in a collision that would total your car. Therefore, new car replacement might not be worth it.
• Vehicle Make and Model: New automobile replacement coverage is smart if your vehicle depreciates quickly. Sports cars, for example, lose value more quickly than other vehicles.

If your car wasn’t totaled, you still have options. Shop around for the best deals and the best coverage that fits your needs and budget. Make sure to consider all options before locking in a policy. For example, if you’re shopping for car insurance, new car owners may qualify for special discounts like safety feature discounts (Read More: Best Auto Insurance Discounts for a New Car).

How New Car Replacement Coverage Helps You Avoid Big Losses

Consider new car replacement insurance if you recently purchased a new car. It can depreciate dramatically once you drive it off the lot, but this policy could be a cost-effective approach to retain the worth of your automobile if you have an accident and total it. Find out more in our guide, “At-Fault Accident Defined.”

In general, it’s a good idea to add this coverage if your insurer offers it and you can afford higher new automobile replacement insurance rates. New car replacement insurance will reimburse you for the cost of a brand-new vehicle of the same make and model if your vehicle is totaled.

Protect your vehicle at the best prices by entering your ZIP code into our free auto insurance quote comparison tool below.