Why Does Allstate ask for New Car Insurance?

Allstate new car insurance

Nothing beats the feeling of acquiring a new car, from the smell to the sound of driving. It’s challenging to imagine your new vehicle being scuffed, let alone totaled, but what would you do if you needed to replace it? Let’s learn why Allstate wants you to buy new car insurance.

You may be able to acquire three additional critical coverages in addition to the state-mandated minimum vehicle insurance for a new automobile to give financial protection in the event your car is damaged beyond repair. These are the coverages:

  • Replacement coverage for a new car
  • Coverage for repair supply and
  • Gap insurance for a loan or lease

Some insurers combine these protections into a single package. Continue reading the article to learn why Allstate wants someone to buy new car insurance and when to choose this type of package and what each coverage protects you from.

What do insurers mean when they say “NEW CAR”?

The definition of a “new” car differs depending on the insurance. Before selling insurance plans for a “new” car, insurance firms may need one or more of the following:

  • The vehicle must be no older than two or three years old (for example, a “new” car insured in 2019 cannot have been manufactured before 2016)
  • The policyholder must be the vehicle’s original owner.

You should also be aware that new automobile coverage usually ends when the vehicle no longer qualifies. Furthermore, the coverage is generally limited to the new automobile you purchased rather than every car on the insurance policy.

Is standard car insurance insufficient?

Certain coverages, such as collision or comprehensive, may help in covering the cost of repairs, minus the deductible and with limitations of your policy. However, if they declare your car is a total loss, your insurance carrier will most likely only pay the vehicle’s price at the time of the accident (known as the “actual cash value”).

When you have a new car, this can be an issue. According to the Insurance Information Institute, new automobiles can lose up to 20% of their value in the first year. Ordinary auto plans usually only cover the actual cash worth, which is generally less than the purchase price.

This means that if your new automobile is totaled in a covered loss, the insurance reimbursement check may not be sufficient to cover the cost of a replacement vehicle. If you also have an auto loan, you will have to clear the remaining balance regardless of whether you can still drive the automobile.

Allstate new car insurance

Important coverage for a new car

Should your new automobile get any damage or require substantial repairs, the following coverages may help in protecting you financially and getting you back on the road.

Replacement coverage for a new car

This coverage may be used to help pay for replacing a new car that has been totaled. Your coverage may allow you to replace the totaled car with a similar model or a fixed monetary sum.

Coverage for repair provision

Insurance may cover the cost of repairs even if your new car gets only partial damage. Repair provision coverage may assist in paying for repairs to a damaged car at replacement cost without considering depreciation. However, keep in mind that coverage limits still exist.

Gap coverage for a loan or lease

Gap insurance can help you cover the difference between a lease/loan balance and the actual cost of a damaged car. Even if you can no longer use your vehicle, you must still pay off any remaining loan or lease. If the insurance company’s reimbursement check isn’t enough to cover what you owe, gap coverage may be able to cover the remaining balance on a loan or lease, ensuring that you aren’t stuck paying for a car that is now in the scrap yard.

Driving a new car is fun, but replacing one can be costly, especially if a new car costs over $36,000. A new car replacement, repair provision, gap coverage, or a package of all three may be appropriate for you.

Hope you got the idea why Allstate wants someone to buy new car insurance. Click here to learn more about your insurance now.