It’s one of the oldest adages in the car industry: the minute you drive your shiny new car off the lot, the value drops by several thousand dollars. A new car depreciates by roughly 20 percent in the first year of ownership. So, if you total your car in an accident or it gets stolen, do you only get the depreciated amount from your insurance company?
Not always. If you have new car replacement insurance, you will receive enough in your payout to purchase a new car of the same make and model, minus your deductible. So, is new car replacement insurance worth it? Let’s take a closer look.
What is new car replacement insurance?
New car replacement insurance is optional coverage you can purchase on top of the liability insurance your state mandates.
Usually, new car replacement insurance is only allowed if your car is less than a couple of years old or has under a certain amount of mileage (often 15,000, or roughly the average mileage that most people drive in a year). Some insurers also require you to carry collision and comprehensive coverage to have new car replacement insurance.
This insurance generally costs about 5 percent of the amount of your total…
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