As you may, or may not know, when you get a new car it quickly devaluates. In fact, your new car can lose hundreds of dollars in value as soon as you drive off the lot. There’s very little you can do to stop your car from losing a certain amount of value, but there are ways of helping insure that you get the true value of your car if you have an accident, or if it’s stolen.
There is always the risk that if you’re in an accident, your insurance coverage may not be enough for you to buy the same new car again. Or, you may owe more on your car loan than you’ll get from your insurance policy. For this reason, there is New Car Replacement Coverage and Guaranteed Auto Protection, or GAP coverage available if you feel you need extra coverage.
Here’s how it works:
If your car is determined to be a total loss, New Car Replacement Coverage pays for a new vehicle of the same make and model, up to 110% of the original vehicle’s Manufacturer’s Suggested Retail Price. Sometimes the manufacturer’s suggested retail price is somewhat higher than what guidelines tell the insurers the car is worth.
Similarly, GAP coverage includes New Car Replacement for the first year of ownership, and then will pay the difference between the value of your vehicle and the amount of your original loan, up to 120% of the value of your vehicle. (If you lease your new vehicle, you may already have GAP coverage. Please check your lease agreement.)
If this is something you are interested, you can buy New Car Replacement Coverage and Gap Coverage as add-ons to your auto insurance policy as endorsements.
As with anything else, there are things to consider. Obviously, this endorsement will increase the cost of your policy so you must weigh that vs the added security.