Can new car replacement coverage pay off my loan on my Mazda CX-5?

I have new car replacement coverage through Travelers. My car is totaled and I want to get a new one. Will my new car replacement coverage pay off my loan so I can get a new car?

“If you have new car replacement coverage through your insurance, they will pay or reimburse you for the cost of a similar make and model. This doesn’t mean they’ll pay off your loan, though.
For your loan to be paid off, you’d need gap insurance. Alternatively, your car’s actual cash value (original price minus depreciation) would need to exceed your loan balance.
With new car replacement coverage, you’ll get a new car but your loan balance will remain the same. Insurance companies want to ensure you’re not profiting from an insurance transaction, so they compensate you so you are in the same financial position as you were before the accident. “
Emily Maracle
Answered on May 07, 2021
Emily Maracle is a car insurance specialist living in New York. Originally from the Pacific Northwest, she has a degree in English Literature and a background in customer service. She enjoys cooking, gardening, and living sustainably. In the future, she can't wait to upgrade to a hybrid or electric car.

Did this answer help you?

Ask us a question by email and we will respond within a few days.

Have a different question?

You can meet us at our office and discuss the details of your question.

Read advice from car experts at Jerry

Easiest way to compare and buy car insurance

No long forms
No spam or unwanted phone calls
Quotes from top insurance companies
Find insurance savings — it's 100% free