Are There Special Car Insurance Coverage Options for New Cars?
Last Updated on December 13, 2022
If you drive a new car, then you have special options for car insurance.
New vehicles qualify for new car replacement insurance, for example, along with gap coverage, mechanical breakdown insurance, safety and security feature discounts, and more.
Which special car insurance options are available for new cars? What’s the best insurance to get for your new vehicle? Keep reading to discover everything you need to know about special car insurance options for new cars.
How Car Insurance Works for New Cars
If you have a new vehicle, then car insurance works similarly to car insurance on your old vehicle.
You buy car insurance to protect against unexpected events. Almost all states (except for New Hampshire) require drivers to carry car insurance to legally drive on public roads.
There are some unique things you need to know about buying car insurance for new cars, however, including:
Your lender may require full coverage car insurance. If you are leasing or financing your vehicle, then your lender requires full coverage car insurance (which includes comprehensive and collision coverage). If you previously drove a financed vehicle but have since paid it off, you may have already dropped comprehensive and collision coverage. Lienholders and lenders have certain insurance requirements for the duration of the loan. After paying your vehicle off, you will only be required to maintain your state’s minimum requirements.
Your old insurance policy may temporarily cover a new vehicle. If you already have car insurance, then you should be able to buy a vehicle and drive it home from the dealership without notifying your insurer. Most car insurance policies offer a grace period for new vehicles. You can drive the vehicle home from the dealership without issue. Contact your insurer to verify you are covered.
You may want to raise coverage limits. New cars are expensive. Your old insurance policy may have been fine for your old vehicle. However, it may not be sufficient for your newer vehicle. Consider raising your collision and comprehensive coverage limits to ensure they cover the full value of your new vehicle.
You qualify for new and unique car insurance options. You may want to buy gap coverage or mechanical breakdown insurance, for example. These coverages are only available on new vehicles.
Minimum state-by-state car insurance requirements don’t change for new vehicles. Yes, you may have a new car. However, your state has the same minimum car insurance requirements. States have the same minimum car insurance requirements regardless of the age, make, or model of your vehicle.
You may qualify for additional discounts. New cars may have better safety ratings, for example, that help you save money on car insurance. New cars may also have advanced security features like remote shutdown to cut costs even further. After buying a new car, contact your insurer for additional discounts.
Below, we’ll break down some of the special car insurance options available on new vehicles.
Collision and Comprehensive Coverage for New Vehicles
Most drivers carry full coverage car insurance (which includes collision and comprehensive coverage) on new vehicles for added protection. Your car is worth a lot of money, and collision and comprehensive coverage protect your own vehicle.
Collision and comprehensive coverage are optional in every state. However, most lenders require you to carry full coverage car insurance. It protects the collateral of the loan (the vehicle). If you drop full coverage car insurance, then you be breaking the terms of your leasing or financing agreement.
As your car gets older, and once you fully own your vehicle, you can drop collision and comprehensive coverage. For most new vehicles, however, collision and comprehensive coverage are important.
Gap Coverage
New vehicles qualify for gap insurance. Gap insurance is available on vehicles you are leasing or financing. It covers the “gap” between the price you paid for the vehicle and the amount owing on your loan.
Let’s say you bought a vehicle for $35,000. After a week of ownership, your vehicle is worth $30,000. However, you still owe roughly $35,000. If you crash the vehicle, then your insurer will cover the value of the vehicle ($30,000), but you still owe $35,000. With gap insurance, insurance covers the “gap” between these two amounts. Insurance covers the amount remaining on your loan. It protects you from paying thousands of dollars in added expenses.
Most leasing and financing agreements require gap coverage. In fact, some have gap coverage built into your leasing or financing payments.
New Car Replacement Insurance
New car replacement insurance is, understandably, only available on new vehicles. With new car replacement insurance, insurance will cover the cost of buying a new car after your old car is involved in a total loss insurance claim.
Let’s say you get into an accident with your new vehicle. Your insurer compensates you up to the value of your vehicle. This amount reflects the actual cash value of your vehicle. However, it does not cover the cost of actually replacing your vehicle with a new car. Some drivers add new car replacement insurance to ensure car insurance covers a new car.
With new car replacement insurance, your insurer covers the cost of buying a replacement car (of the same make and model) if you are involved in a total loss. It’s exclusively available on newer vehicles, and it’s only available to those with full coverage car insurance (including comprehensive and collision coverage).
Mechanical Breakdown Insurance
Mechanical breakdown insurance is exclusively available on new vehicles. It works similarly to an extended warranty, covering your car against certain breakdowns over a specific period of time.
Not all insurers offer mechanical breakdown insurance. Typically, your car needs to be nearly brand new to qualify for mechanical breakdown insurance. Some insurers require you to have fewer than 20,000 miles on your vehicle, for example, to qualify for mechanical breakdown insurance. Others require the vehicle to be one to two years old to qualify.
GEICO, for example, offers mechanical breakdown insurance on newer vehicles. GEICO’s mechanical breakdown insurance is available on cars newer than 15 months old with fewer than 15,000 miles on the odometer. Once you qualify, you can renew the mechanical breakdown insurance every year for a maximum of 7 years or 100,000 miles, whichever comes first.
Items covered by mechanical breakdown insurance include:
- The cost of repairing unexpected damages to most parts of your vehicle
- Problems with the powertrain, including the transmission, drive axle, and engine and electrical components
- Breakdowns with certain other systems of your vehicle, including your brakes, steering, suspension, air conditioning, and other components (some of which are only covered by premium mechanical breakdown insurance policies)
Mechanical breakdown insurance does not cover routine maintenance, wear and tear, or accident damages.
Mechanical breakdown insurance costs $75 to $160 per year, depending on your vehicle and insurer. You pay a deductible of $250 to $500, and your insurer covers the cost of repairing your vehicle.
Safety and Security Feature Discounts
Many new cars have advanced safety and security features. These features reduce the risk for your insurer, and they could save you hundreds per year on car insurance.
Cars with remote shutdown, for example, are cheaper to insure because they’re harder to steal. If you have comprehensive coverage, then your insurer pays to replace your car after it’s stolen. With remote shutdown and other security features, you have a lower chance of car theft, which means less risk for your insurer – and lower premiums for you.
Similarly, some modern vehicles have better safety features than others. They have better rollover ratings, for example, and perform better in crashes. Insurers check accident statistics to determine risk. If your new vehicle has a much better safety rating than your older vehicle, then you could qualify for additional discounts.
Some vehicles have other features that reduce the risk of injury for drivers and passengers. Side airbags, for example, can reduce the risk of injuries after an accident, which could save your insurer thousands of dollars in medical bills they would normally cover.
Final Word – Special Car Insurance Options for New Cars
If you drive a new vehicle, then you qualify for special savings, discounts, and insurance options.
As a new vehicle driver, you may want to adjust coverage to ensure you’re protected. You may also want to add new car replacement insurance, mechanical breakdown insurance, gap coverage, and full coverage car insurance to your policy, among other options.
Contact your insurer to determine any special car insurance options available for your unique needs.
