Make the right coverage choice: replacement cost or replacement value?

The purchase of a new or used vehicle is one of the largest investments we make in a lifetime, so it makes sense to take steps toward protecting it in case of damage. The real decision comes down to choosing which type of protection is right for you. Which type of coverage is best suited to your needs: replacement cost or replacement value?

While both products are sold separately, they still have some points in common. First, they are add-ons to your insurance policy, so without insurance, there is no replacement coverage. Second, they are offered by insurance companies because they allow you to receive damage compensation regardless of the extent. Replacement insurance is also offered by certain dealerships. Let’s take a closer look at these two products.

Replacement value insurance is offered for a maximum duration of 7 years and is applicable to both new and used vehicles. It comes with a reimbursement of your deductible up to $2,500 in the event of a total loss and up to $250 in the event of a partial loss. If a courtesy vehicle is required during repairs, up to $75 per day will be granted to cover the expense. Furthermore, the replacement value premium is fixed, and therefore not subject to an annual increase. Should multiple claims be made, you keep your replacement value insurance. Finally, the settlement you receive regarding a loss is made out to your name only.

Replacement cost insurance lasts up to 5 years and is available only for new vehicles. The replacement vehicle you receive will be of the same model year as your damaged vehicle if it is still on the market. If it is unavailable, you will receive a vehicle of the model year of the accident. In the event of a partial loss, the insurer may repair the vehicle with original parts from the manufacturer, similar parts or other parts. Should a courtesy car be necessary during the repairs, no compensation is offered. With regards to the premium for replacement cost insurance, it is progressive, which means it increases each year based on your record. Finally, should several claims be made, the insurer reserves the right to withdraw your replacement cost insurance.

For both products, communicate with your broker or insurance company to make the right choice.

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