New car replacement and GAP insurance coverage guide

If you have an accident in your new car, your insurance coverage (after you pay your deductible) may not cover the full cost of replacing your vehicle or the initial loan you took out to buy the car. That’s where new car replacement insurance and guaranteed auto protection (GAP) coverage come in.

Here are two examples to help explain:

Example 1: You buy a car for $25,000. Four months later, you're involved in an accident, and the car is deemed a total loss. The depreciated value of the car is $20,000, but it will cost you $25,000 to buy that same car again. That’s a hefty difference of $5,000. This is where new car replacement coverage can help.

Example 2: You buy a car for $25,000. Nearly two years later, you are involved in an accident and your car is deemed a total loss. The depreciated value of the car is $11,000; however, you still owe $15,000 on your loan. GAP insurance will reimburse you in this case.

What is new car replacement coverage?

New car replacement coverage lets you replace your vehicle with the same make and model at a total price of up to 110 percent of the manufacturer’s suggested retail price (MSRP) — within the first year of ownership or within the first 15,000 miles.

What is GAP insurance coverage?

GAP coverage may pay the difference between the value of your vehicle and the amount of your original loan. This coverage extends to 120 percent of your vehicle’s value. GAP coverage includes new car replacement coverage for the first year of ownership and then offers additional protection for the next two years.

These optional endorsements may be added to your auto insurance policy. Get more facts about New Car Replacement and GAP Insurance Coverage in our Learning Center.