While new car replacement coverage is optional and lenders don't usually require it, what could be worthwhile is additional financial protection for you. This coverage is especially worthwhile if you drive a car that depreciates particularly quickly, such as a sports car or electric vehicle, or if you can't afford part of your pocket for a replacement car in the worst case scenario. A vehicle is considered total when the cost of repairs approaches or exceeds the actual cash value (ACV) of the car, which is what the insurer says the car was worth before it was damaged. If the insurer states that the vehicle is a total loss, it will pay any insurance claim based on the ACV.
If your car is wrecked and another driver is at fault, your liability insurance will pay the value of the car up to the limits of your policy. Yes, Liberty Mutual offers new car replacement insurance, which pays for the replacement of a wrecked car with a new vehicle of a similar make and model. If you have a new car or are thinking about buying one soon, new car replacement insurance from Liberty Mutual could be a good investment. Liberty Mutual doesn't disclose the exact costs of its new car replacement insurance, but this type of coverage typically costs about 5% of the policyholder's premium.
Once your lender has received the insurance check, you can file a provisional insurance claim right away, assuming that you have already purchased coverage and still owe money to your lender. However, you'll need proof that your car was worth more than the insurer calculated, and there's no guarantee that you'll receive more money. An insurance company determines the total value of a car by taking into account factors such as the make and model of the vehicle, the year and the mileage. If your car is totally destroyed and you still owe money for the loan, the insurance company will pay your lender the value of the car and you will be responsible for the remaining balance if the check is less than the amount of the loan.
Without new car replacement insurance, Liberty Mutual will only reimburse you for the full actual cash value (ACV) of the car, which is affected by factors such as depreciation and physical damage. Specifically, Liberty Mutual's new car replacement insurance is available if your car is less than a year old and has less than 15,000 miles.