New car replacement insurance

What is new car replacement cover?

Also called ‘new for old’ car insurance, this type of cover can replace your car with a brand-new one of the same make, model and specification if yours is stolen or written off.

In cases where a suitable car’s not available, the insurer may instead reimburse what you paid for the car or the manufacturer’s current list price, usually whichever is lower.

New car replacement cover only applies to vehicles that are fairly new though - usually under 12 months old. If your car’s older and it’s stolen or written off, your insurance provider will only offer you its market value at the time of the incident.

Some comprehensive policies offer new car replacement cover as standard. We checked Defaqto, and out of 325 comprehensive policies, 95% offered new car replacement cover.^[1]

Check your policy documents to see if it’s part of your existing cover, or compare policies to find insurance that includes it.

Who should consider new car replacement insurance?

We’ve all heard the saying that a new depreciates as soon as you drive it off the garage forecourt.

With these statistics in mind, it’s important to be aware that if your new car’s involved in an accident and written off, or stolen within a year of purchase, your insurance provider would only reimburse you for its market value at the time of the incident - unless you have new car replacement cover included in your policy.

With this cover in place, you’d instead receive a brand-new replacement car of the same make, model and specification. Or a payment to cover the cost of buying a brand-new one.

So if that’s important to you, look for a policy that offers new car replacement cover.

What are the criteria for new car replacement?

To be eligible for a new replacement car under this type of insurance, you’ll need to meet a few qualifying conditions. These usually include that:

• The car needs to have been bought new within a certain timeframe, usually no longer than 12 months ago
• You must be the registered owner of the insured vehicle and bought the car outright. Or, if you bought the insured car under a hire purchase agreement, the hire purchase company must agree to the terms of the policy
• You must be the first registered keeper of the vehicle. In some cases, insurers allow you to be the second registered keeper, if the car’s been pre-registered in the name of the manufacturer or the dealer you bought it from - as long as the mileage was under a certain amount when you bought it

‘Ex-demonstrators’ and ‘nearly new’ cars don’t usually qualify for new car replacement cover, but it’s always worth checking with the insurer.

What types of incidents are covered by new car replacement insurance?

You’ll only be eligible for a new car replacement after certain events.

• If your car’s involved in an accident and the cost to repair the damage is more than 50 to 60% (depending on the insurer) of the vehicle’s price when you bought it

Or

• If your vehicle’s stolen and not recovered

What types of incidents are not covered by new car replacement insurance?

As is the case with most policies, new car replacement insurance won’t provide cover if your car’s stolen or damaged because of negligence (leaving it unlocked or unattended with the engine running). Wear and tear and mechanical breakdown are also not covered.

You also won’t be offered a new car if your vehicle’s damaged in an accident and the cost of repairs is less than 50% to 60% of the price you purchased it at (amount can differ between insurers). In these circumstances, the insurer will usually pay for repairs and replace damaged parts instead.

What happens if I don’t have new for old cover and my car is written off?

If your car doesn’t qualify, or your insurance doesn’t cover new car replacement, you’ll be offered the current market value of your car by your insurer.

It’ll probably be less than you paid for it, as a new car loses value quickly.

So, if you wanted to replace it with a brand-new car, you’d have to pay the difference between the amount your insurer gives you and the value of a new car.

For example, let’s say your new car originally cost £15,000. It’s written off ten months later and its market value has dropped to £10,500. This is the amount the insurer would pay out. So you’d have to pay the other £4,500 yourself to purchase a new similar car.

What is guaranteed asset protection?

If your car insurance doesn’t offer new for old cover as standard, you could look at taking out a guaranteed asset protection (GAP) insurance policy.

It makes up the difference between what an insurance company offers you if your car is written off or stolen (its current market value) and what you originally paid for the car, or how much finance you still owe on it.

GAP policies are designed to provide you with enough funds to buy a new replacement car, or to ensure you clear any outstanding debt if you bought your vehicle on finance.

What is agreed value car insurance?

With an agreed-value policy, you set the value of your car with the insurer and they’ll pay out that amount if your car’s a total loss, regardless of its market value.

It’s an option often suitable for people with specialist or modified cars that are worth more than others of the same age and model.