2019/09/30
KBD Insurance

Replacement Cost Explained

Congratulations, you just purchased your brand-new car! You feel like a million bucks, and you’re ready to take it out for a spin. Not to be a downer, but the second you leave the lot of the car dealer, your car will diminish in value anywhere from 10%-18%. Yes, this is not a typo. The instant your car leaves the car dealership it drops tremendously in value. So, in today’s blog, we’re going to discuss how you can protect this amount and prevent your vehicle from diminishing in value, for a relatively small monthly cost.

The basic rule of thumb for car insurance is to compensate the insured (you) for the value of the property on the day the loss occurs. In other words, if you have a car accident in 1 week, 1 month or in 1 year after the purchase of your vehicle, your insurance policy is going to pay you the actual cash value; the value of what your car would sell for on the open market. When you purchase a standard, “two-way” insurance for your leased or financed vehicle, you will be paid the actual cash value if ever your car is a total loss or is stolen.

Now, here is where replacement cost comes into the picture. Let’s take an example, where you purchase a new car for $30,000. Two years later, your car is stolen, and at this point in time the car is worth $15,000; the replacement cost insurance policy is going to pay for the difference between the actual cash value and the cost to purchase a new car (in this example, that would be $15,000). With KBD’s replacement cost insurance product, you will be eligible to receive a new car, the same make and model, the year of your loss. So, in the example above, if you purchased a $30,000 Honda in 2017, and it was stolen in 2019, you would be eligible to receive a brand-new Honda, 2019 model.

How do I purchase replacement cost and protect my car from depreciation?

Who is eligible?

Anyone who carries full two-way insurance coverage, through any Quebec insurance company, is eligible to benefit from our replacement cost contract and to protect their car from depreciation.

Which insurance company is behind KBD’s replacement cost product?

The replacement cost contract that we provide to our clients is supplied by a subsidiary of Intact Insurance, CIME cabinet d’assurances inc. Any one of our clients can purchase this product as a supplementary contract to help protect their car against depreciation.

Advantages of Purchasing a Replacement Cost Contract:

To conclude, it’s always a good idea to complement your automobile insurance policy to ensure that you are not covered based only on the depreciated value of your vehicle. We suggest to contact an insurance expert (like KBD) to make sure that you are aware of all of the facts when purchasing a new vehicle. The pointers listed above have hopefully clarified the details of the product, and if you have any questions or would like additional information, please do not hesitate to give us a call or send us an email!

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