Do insurers replace the full value of your vehicle if it's damaged within the first year?

My cousin says that his insurance policy will replace the full value of his car if it's totaled within the first year of ownership. Do insurance companies normally do this?

Answer
“Most car insurance carriers use actual cash value as a means to reimburse you if your vehicle is totaled. This means that they look at the new cost of your vehicle and subtract depreciation to get the actual cost of your vehicle today.
However, for new vehicles, insurance companies will often offer an option for replacement cost coverage. With replacement cost coverage, if your vehicle is totaled within the first year or two, they will reimburse you to get another vehicle of comparable material, style, and quality.
As new vehicles depreciate quickly, replacement cost coverage ensures you’re not going to lose the value of your new vehicle in the event of an accident.
Not every insurance company offers replacement cost coverage. Those that do may have different terms and conditions, so it’s important to read over the policy to fully understand what may or may not be covered. “
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Emily Maracle
Answered on Apr 30, 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.
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