Guide to New Car Replacement Insurance and GAP Coverage

New car smell. It's just one of the joys of buying a new car. Having a new ride, flawless interior and technology upgrades are just a few more. You can help protect your purchase with New Car Replacement Insurance and GAP coverage. Here’s how they work.

Let’s say you’ve bought a new car. If the car depreciates in value quickly and you are in an accident,  your insurance coverage may not be enough for you to buy the same new car again. Or, you may owe more on your car loan than you'll get from your insurance policy. That’s where New Car Replacement Coverage and GAP insurance come in.

Help protect your new wheels

If you're in an accident and your vehicle is determined to be a total loss:

  • New Car Replacement Coverage: Pays for a new vehicle of the same make and model, up to 110% of the original vehicle's Manufacturer's Suggested Retail Price.
  • GAP Coverage: Includes New Car Replacement Insurance for the first year of ownership, and then will pay the difference between the value of your vehicle and the amount of your original loan, up to 120% of the value of your vehicle. (If you lease your new vehicle, you may already have GAP coverage. Please check your lease agreement.)

You can buy New Car Replacement Coverage and GAP Coverage as add-ons to your auto insurance policy. (They are called endorsements.) You can add both New Car Replacement Coverage and GAP Coverage to your policy. Or, you can add New Car Replacement Coverage only to your policy. You can't purchase GAP Insurance Coverage without buying New Car Replacement Insurance.

How does New Car Replacement Coverage work?

Here's an example of New Car Replacement Insurance in action:

  • You buy a new car for $20,000.
  • Six months later, your car is totaled in an accident.
  • The value of the car is $16,000. It costs $20,000 to buy the same car again.

If you have New Car Replacement Insurance, we will pay to replace your car. That's right. We will pay the full $20,000 to buy you the car. (In this example, the car's price is less than 110% of the Manufacturer's Suggested Retail Price.)

How does GAP Insurance Coverage work?

Here's an example of GAP Coverage in action:

  • You buy a new car for $40,000.
  • Two years later, your car is totaled in an accident.
  • The value of the car is now $24,000. But, you still owe $28,000 on your loan.

If you have GAP Coverage, you can be reimbursed up to 120% of the value of the vehicle. In this case, your loan will be paid in full.

Ameriprise Auto & Home's New Car Replacement Insurance endorsement provides full protection for the first year after you buy a new car or for the first 15,000 miles. Ameriprise Auto & Home's GAP Coverage provides additional protection for two more years.