Buying a used vehicle can sometimes prove more complex than buying a new one. To avoid buying a lemon and other unpleasant surprises, looking far and wide is in order. Once you think you might have found the right vehicle, look into its past use and have it inspected – an absolute must before buying it. Now that you have found the rare gem, it would be quite normal to want to protect your investment wouldn’t it! That’s why Assurances Multi-Risques would like to tell you about a very interesting product for used vehicles: replacement insurance.

*This product is also offered for new vehicles, but this article will focus on used ones.  


What is replacement insurance?

This product is similar to another product called replacement cost insurance. Without replacement insurance, your insurer will only offer you the residual worth (price on the market once the vehicle’s depreciation has been taken into account) of your vehicle should it ever be deemed a total loss.


Concrete example: vehicle declared a total loss WITHOUT replacement insurance

Here is an example of what we mean: In 2016, you bought a 2014 BMW X3 from the used car lot of an auto dealer for $36,000. Two years later, you had an accident and the car was totaled by your insurer. Thankfully, you were not hurt in the crash, but you are rather unhappy at the thought of having to buy a new car. To make things worse, since you had not subscribed to replacement insurance, your insurer only offers you $23,000 when your car loan amounts to $29,000. No matter how you argue your point, your insurer won’t budge since his offer is in fact what your car was actually worth on the market at the time of the accident. This means that you will have to pocket a $6,000 loss.


And what if you had taken replacement insurance on your car?

If you had had replacement insurance, your car insurer would have handed you a first settlement check in the amount of $23,000, i.e. your car’s market worth. The replacement insurance company would then have stepped in with a 5% indexation on the yearly amount you had paid since buying the car, i.e. an additional amount of up to $16,690. This would have meant that you would have received a total insurance settlement of $39,690.

Therefore, if you had subscribed to replacement insurance for the car, you would have not only avoided the $6,000 loss, but you could have received an additional amount of up to $16,360. Would it have been complicated to deal with claims to two separate insurers? If you had worked with broker who took care of things for you, the answer is no!

As you probably already know, car values can plummet rapidly. Therefore, in order to help you to make a wise choice when buying a used car and to help protect your personal finances, we suggest that you contact an independent insurance broker. He or she will be able to tell you more about replacement insurance, answer all of your questions, and even offer you personalized insurance solutions to best meet your specific needs.