Typically, car insurance companies will reimburse you for the cash value of your car up until the date of the accident. However, new cars can depreciate very quickly, so if you are involved in an accident shortly after the purchase of your car, the amount paid to you will be based on the depreciated value of your car, which can be significantly less than what you paid for it.
For example, let’s say you purchased a brand new $60,000 car, and got in an accident driving it home. As soon as you drove that car off of the lot, it went from being a brand new car to a “used” car, which depreciates its value by approximately 9%. If you get in an accident while you are driving home from the car dealership, the insurance company will only pay you $54,600 to replace your car.
“Call your broker and ask about an SEF 43R or “Limited Waiver of Depreciation” endorsement.” ~Chad Mullen, Lane’s Insurance
In order to protect your investment, it is a good idea to obtain replacement cost coverage on your vehicle. You will need to call your broker and ask about an SEF 43R or “Limited Waiver of Depreciation” endorsement. With SEF 43R coverage, your insurance company will provide the replacement cost of your vehicle, for anywhere from 3 to 5 years, if you have suffered an insured loss. With this coverage, losses are paid to you without taking depreciation into account. SEF 43R coverage is only available if you recently purchased your vehicle from a dealership brand new, so if you purchased your vehicle used, this coverage option is not available to you.