New Car Replacement Insurance Explained

You’ll probably appreciate new car replacement insurance if your car is totaled, but in most cases the extra coverage comes at a price.
Lisa Green
By Lisa Green 
Edited by Lacie Glover Reviewed by Brenda J. Cude

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Before you drive a new car off the dealer’s lot, you may want to consider new car replacement insurance.

Say your car — your new baby — is stolen or totaled in an accident. Comprehensive and collision insurance, both typically required for the life of an auto loan, will pay out up to the car’s value, minus any deductible.

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🤓Nerdy Tip

A deductible is the amount you're responsible for paying if you file a claim. When you buy your insurance policy, you select your deductible. If you choose a high deductible you'll have a lower car insurance premium, but you'll also pay more out-of-pocket if you make a claim.

But because new vehicles lose value quickly, that claim check will be less than what you paid for the car, leaving you in a financial bind with no ride.

New car replacement insurance, an option with some insurers, offers to ease the financial pain. It pays the value of a brand-new car of the same make and model, minus the deductible, if your car is declared a total loss.

New car replacement insurance generally costs extra and is available only if you buy collision and comprehensive insurance.

Who offers new car replacement insurance?

New car replacement insurance isn’t universally available. Some of the nation’s largest auto insurance companies, including Geico, Progressive, State Farm and USAA, don’t offer it. And among companies that do offer it, new car replacement coverage may not be available in all states.

The companies in the table below describe their policies online. But others may offer new car replacement coverage as well, so be sure to check with your insurer.




Covers first 4 years of new vehicle ownership. Also available for motorcycles.

Vehicle must be 2 model years old or newer.

Covers first year or first 15,000 miles. If new vehicle of same make and model isn’t available, pays up to 110% of the original vehicle's MSRP.


Coverage must begin within 30 days of buying a new car with fewer than 1,000 miles on it from current or previous model year.

Concord Group

Coverage up to 24 months after purchase. You can also buy this as part of two different packages.

Covers the first 2 years. Can be added at any time before a loss.

Vehicle must be insured with Farmers upon purchase and be less than 2 years old and have fewer than 24,000 miles.

Applies to vehicles up to 4 model years old (5 in some states).

Covers first year or first 15,000 miles.

Included free on AARP auto insurance policies.

Vehicle must be less than a year old and have fewer than 15,000 miles.

Nodak (North Dakota Farm Bureau)

Vehicle must be no more than 2 years old and have fewer than 24,001 miles.

Penn National

Does not apply if new car is stolen or damaged by fire.

Plymouth Rock

Covers original owner's first 2 years of ownership, with upgrade packages available.

Applies to original owner of a car less than a year old and with fewer than 15,000 miles.

Covers first year or first 15,000 miles. Included on all Shelter auto policies.

Covers first 5 years of new vehicle ownership. Also includes gap coverage and lower deductible for glass claims.

How much new car replacement insurance costs

Pricing varies by driver, vehicle and state, so some companies don’t provide cost details.

To give a rough idea, Farmers says the cost for its new car replacement insurance varies, but typically adds about 5% to 13% of the price of your comprehensive and collision coverage. So if your Farmers comprehensive and collision insurance costs $100 a month, you'd pay an extra $5 to $13 a month to add new car replacement coverage.

Some insurers like Shelter, include new car replacement coverage at no extra cost; other companies bundle it with a package of upgrades.

The only way to get an accurate price is to compare car insurance rates.

Car with shield on road

See what you could save on car insurance

Easily compare personalized rates to see how much switching car insurance could save you.
on NerdWallet

New car replacement vs. better car replacement

If you don’t drive a new car, replacement coverage may not be available to you. But you may be able to get “newer car replacement” or “better car replacement” policies at some companies, including:

  • Acuity.

  • Erie.

  • The Hanover.

  • Liberty Mutual.

The optional better car replacement coverage at Liberty Mutual, for example, will pay you the value of a car that’s a model year newer and has 15,000 fewer miles on it than your totaled vehicle.

New car replacement vs. gap insurance

While new car replacement insurance can help you buy a new car, gap insurance is designed to make sure you can pay off the old one.

If your car is totaled or stolen and your collision or comprehensive insurance doesn’t cover what you owe on the car’s loan or lease, gap insurance pays the difference minus any deductible. Prices vary, but generally gap coverage costs a few dollars a month, according to the Insurance Information Institute.

Insurance Information Institute. What is gap insurance?.

Before you buy gap insurance or new car replacement coverage:

  • Understand the terms and conditions. Depending on the insurer, gap coverage might be available for more years than new car replacement coverage — beneficial if you have a loan.

  • Get quotes to compare the costs of gap insurance and new car replacement coverage, especially if you owe more than the car is worth.

  • If you skip gap or new car replacement coverage, make sure you have enough in savings to both repay a lender if the car is totaled and make a down payment toward another car.

If you do opt for new car replacement insurance, be sure to cancel it once your car is over the age limit or mileage specified by your insurer. Otherwise, you might end up paying for expired coverage.

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