The truth about Automobile Insurance Carriers and “Accident Forgiveness” and “New Car Replacement” coverage

How many times have you seen a commercial from one of the Big Automobile Insurance Carriers promoting “Accident Forgiveness” or even “New Car Replacement!”

The truth is, “New Car Replacement” and “Accident Forgiveness” coverage are offered by almost all personal automobile insurance carriers – not just the big direct writers you see on TV. However, what the Big Carriers don’t tell you in their advertisements is that these coverage enhancements are not free – if you want these coverages, you are going to have to pay an extra premium in order to get them. Advertising these fancy-sounding coverage enhancements is simply a way for insurance companies to get you to call them for a quote, so they have the opportunity to sell you an insurance policy.

Let’s look at New Car Replacement coverage. What the commercials don’t tell you is that this coverage only ever comes into play if your car is totaled during an accident, and it’s typically only provided while your car is still relatively new – generally only for the first two years after the car is built. Also, the policy wording typically indicates that it only will replace your car with what it would cost to buy a brand new car that is the same model year as your existing car! So, if your 2017 Toyota Camry is in an accident in 2019, this coverage will not pay for a 2019 Toyota Camry, it will pay the cost to buy a brand new 2017 Toyota Camry – if you can find one. The fact is, when someone buys a brand new car they expect it to depreciate in value over time and they understand that when they sell it, they will only get the book value of the car based on the car’s age, miles, and condition – no one expects to be able to sell their 3 year old car for what they paid for it when they bought it new. This type of coverage is relatively new to the marketplace and it shows how automobile carriers are willing come up with a coverage that no one really wants or needs so that they have something new and unique to advertise. In other words, it’s a trick to get people to call them for a quote.

Accident Forgiveness is another relatively new concept – however as with New Car Replacement this coverage is not free; you will pay an additional premium for this coverage. It sounds great, because everyone knows your insurance is likely to go up if you get into an accident – but does it really make sense to pay a higher premium up front for coverage you may never need if you’re a good, safe driver? Also, this coverage is typically not available to people who have accidents on their driving record violations within the past few years. Again – this is a no more than a clever marketing idea to get people to call them for a quote.

It’s easy to be tempted by insurance coverage that promises to keep your premium low or replace your car in the case of an accident, but the truth is that this coverage can be offered by almost all insurance carriers – it’s just not typically recommended by insurance agents who have your best interests at heart. If you are interested in Accident Forgiveness or New Car Replacement coverage enhancements, consider speaking to your independent insurance broker to learn how much more these options can cost you in the long run. Just like big carriers who promise “it only takes 15 minutes to save on your car insurance,” it’s only marketing.

Remember, big direct writer carriers have one job: to sell you their insurance.

Find an independent insurance broker who has access to multiple automobile insurance carriers, not just one carrier – not only will your broker find you the best coverage for your budget, but he or she will develop a relationship with you to understand your needs, explain how various coverage options work, and always be around to answer your questions or to help you to settle a claim with the carrier.