By JOSH UNDERWOOD
Walking through an auto dealership the other day, I couldn’t help but be impressed by all the new vehicles on the lot.
Every year, cars and trucks get fancier, sleeker and harder to resist.
When you slide into that new seat with that new car smell and turn the ignition key, it can feel like the lap of luxury. For many auto policies, though, that luxurious feel can be fleeting if you were to be involved in a major accident soon after your new purchase.
Many auto insurance policies insure vehicles on an actual-cash-value basis, which means there is depreciation factored into the claim. So that new car you just purchased might yield thousands of dollars less in an insurance settlement if the vehicle were to be totaled soon after your purchase.
One way to insure against that potential for lost value is to take replacement cost coverage on your new vehicle. With replacement cost coverage, you could be compensated for the full amount of a like make and model vehicle, if you chose to replace the vehicle after a total loss.
For example, we had an insured involved in an accident a couple of years ago in which the vehicle was totaled. Our insured was driving a 2013 Cadillac with replacement cost coverage on it. If the vehicle was insured for just actual cash value, the insured’s settlement would have been $30,000. Because, though, there was replacement cost coverage on the vehicle, the insured elected to purchase a brand-new vehicle and received an additional $20,000 toward that purchase.
For insurance carriers that offer replacement cost coverage on new vehicles, the coverage is typically available for a limited period of time from the date of purchase, perhaps a year or so, and then drops off the policy.
With State Auto Insurance, though, one of our agency’s main carriers, replacement cost coverage can stay on a vehicle for up to four years from the date of purchase. So, if you bought a new 2016 vehicle and put replacement cost coverage on it, if you unfortunately had an accident three years later that totaled the vehicle, you would have the option on your insurance coverage to replace the vehicle with a like make and model with no depreciation.
Pretty good deal.
With auto replacement cost coverage, you have the choice to recapture that new-car feel if you have an accident that totals your new vehicle.
For many people, that’s a coverage that can bring peace of mind.
(Josh Underwood is an agent at Cook, Downing & Underwood Insurance Agency. You can reach him at 270-651-2194).