Everyone loves a new car. Whether you are replacing an existing vehicle or adding another vehicle to your household, it’s important to understand how this “new addition” affects your insurance coverage.
Active auto policies have automatic coverage for a specified number of days. The number of days for automatic coverage depends on state regulations AND whether the vehicle is a new or replacement vehicle. There are also stipulations as to whether your auto policy’s automatic coverage provides liability only or full coverage (comprehensive and collision).
Before you begin shopping for your dream car (or maybe soccer team transport vehicle?), it’s a good time to talk with your insurance agent about the types of coverages required and available, to make sure you are fully protected when you drive that car off the lot.
For example, did you know that some carriers offer repair/replacement cost coverage? This optional coverage pays for repair or replacement cost of your vehicle.
Say, for example, that you purchase a new car today for $25,000. Two years from now, you’re involved in a covered collision accident. The cash value of the car at the time of the accident is $17,000 and the cost to repair is $20,000.
Without repair/replacement cost coverage, you receive only the cash value ($17,000). With repair/replacement coverage, your carrier will repair your car with parts of like kind and quality up to $20,000, less your policy’s deductible.
Here’s another example. You purchase a new car for $30,000. Twelve months later, you have a covered collision loss and your vehicle is totaled.
Without repair/replacement cost coverage, you only receive the current cash value of your car – at this point, about $23,000, less the deductible. If you elected the optional repair/replacement cost coverage, your car would be replaced with a brand new car of similar make, model and options, less the deductible.
IMPORTANT: This is an optional coverage, and not offered by all insurance carriers. Most carriers have limitations on how long a vehicle can be covered and a time limit on when this coverage can be added. The cost varies by company, but is tied to the cost of the vehicle and generally runs about 15 percent of the cost of the comprehensive and collision coverage. Carriers also have the option to pay a cash settlement in lieu of actual repair or replacement.
For more information about insurance for your new (or not-so-new) vehicle, contact your Allen Tate Insurance agent.