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New for old car insurance

New for old car insurance

Is the thought of loss or damage to your new car keeping you awake at night? You might want to consider new for old car insurance.

New for old cover provides you with peace of mind, promising to replace your lost or damaged vehicle with a brand-new car, so you don’t have to worry about forking out the cash.

Daniel Hutson
From the Motor team
minute read
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Posted 7 JANUARY 2020

What is new for old car insurance?

New for old car insurance is cover that could offer you a like-for-like replacement car, if your car has been written off or stolen.

If your car qualifies, your insurance provider will replace it with a vehicle of the same age, mileage, make and model as the original car you bought. If a matching car is unavailable, they may offer you the equivalent ‘replacement cost’ to buy an alternative yourself. It’s also known as new car replacement cover.

New for old car policies usually apply to cars less than a year old, where the cost of repair is more than the car’s retail value.

Some insurance providers offer new for old car insurance as standard, so it’s worth checking your policy to see if it’s included in your cover. Otherwise, you may be able to buy it as an add-on.

How does new for old car insurance work?

Your car will need to meet certain criteria to qualify for a replacement through your insurance. These may include:

  • Age – your car will usually need to be less than a year old to qualify for a like-for-like replacement.
  • Damage – the damage to your car must be considerable enough to need a replacement, rather than repairs. There’s usually a minimum cost of repairs that your car will need to exceed, to warrant a replacement. Find details of this in your policy documents.
  • Mileage – some insurance providers may set a mileage limit on new for old policies.
  • You’re the registered owner – you must be able to provide proof of ownership for the vehicle you’re claiming for.

There may be other exclusions depending on your insurance provider. Check your policy paperwork for a full list of terms and conditions.

Are there any other costs for new for old car insurance?

When taking out cover, a customer will agree to a voluntary and compulsory excess – say £500. This excess is payable in most claim scenarios. That means the £500 in the example mentioned above would be taken away from the payout you’d get from the insurer (if a replacement vehicle or repair wasn’t possible).

If you were not at fault for the loss of, or damage to your vehicle, you may not have to pay this, as the other party’s insurance should pay out.

What happens if I don’t have new for old cover and my car is written off?

If you don’t have a new for old policy for your car, your insurance provider should offer you the current market value of your car. This is what your car would be worth if you were to sell it in working order at the time the loss or damage occurred.

For example, say you bought a new car for £12,000. Over the first year its value depreciates through general use and wear and tear. By the time the damage occurs, the car is only worth £7,000. This is what your insurance provider will pay out. So if you want to buy a car of the exact value as a replacement, you’ll have to find the other £6,000 yourself.

Is new for old car insurance worth it?

New for old policies can offer peace of mind for car owners who are concerned about loss or damage to their new car in the first year.

Some cars depreciate faster than others. If you’ve bought a brand new model, it’s likely to fall in value more in the first year than an older vehicle. This could make new for old car insurance more worthwhile for people buying brand new cars, as the gap between the purchase price you paid and what your car is worth will probably be greater.

If your new car is stolen, or damaged to the point where it will cost more to fix than to replace, new for old car insurance could be your lifeline.

What is agreed value car insurance?

Agreed value car insurance is an alternative to new for old cover if your car is a complete write-off. It tends to be for vehicles that have a higher value than other models of a similar age. You and the insurance provider agree the cost of buying a replacement car when you first buy the insurance policy.

Payment is based on the price agreed for your car in the event of it being written off or stolen.

What is guaranteed asset protection?

Guaranteed asset protection, aka gap insurance, is another way of financially safeguarding yourself when you buy a new car.

It’s cover for any difference between what your car insurance policy pays out and the original purchase price of your car, in the event of it being written off. You could then pay off any outstanding car loan.

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