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Couple Buying Fancy Car

Better-car replacement insurance almost sounds too good to be true. If your car is totaled and you have this coverage, your auto insurance policy could pay for a replacement that's better than what you were already driving.

It sounds a little far-fetched, but this is an option offered by many car insurance providers. So how does it work?

One Year Better

You're not going to be able to replace your Hyundai with a Lamborghini, of course. Better-car replacement insurance gives you the chance to replace your car with one that is a bit better than the one you just lost. Usually, this means that they will pay not for the same car, but for a replacement that is one year newer. Your insurer may also help you to pay for a car with fewer miles on it. The mileage difference will vary from insurer to insurer, but you can expect an average in the area of 10,000 miles.

Will It Pay Off My Loan?

Unfortunately, better-car replacement insurance will not usually pay out enough to buy a new car and pay off your loan. However, you can make up the difference by adding a gap insurance plan to your policy. Gap insurance will help you to pay off your remaining payments on the totaled car, minus your deductible. With better-car replacement and gap insurance in place, you essentially have full coverage to get back on the road again without having to worry about that loan on a car that you didn't even get to keep.

Gap insurance and better-car replacement insurance stand as solid proof that it's usually worth the extra cost to go above and beyond the minimum requirements. The legal minimum will cover you for liability and basic comprehensive and collision will keep you from being bankrupted by a single accident. But gap and better-car replacement may help you to get back on the road in no time at all.

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