Buying or leasing a car often means a making big investment. But if your car is a total loss or stolen, the payout from your insurer can be much less than what you originally paid for your vehicle. That’s where replacement insurance comes in — it’s a type of protection designed to bridge that gap and give you peace of mind during a tough time.

What is replacement insurance in car insurance?

Replacement insurance is an add-on to your standard car insurance policy in Quebec. This coverage protects you from your vehicle’s depreciation. Simply put, it pays the difference between your car’s value at the time it’s written off and the cost to replace it with a new, equivalent model.

How does replacement insurance differ from the Replacement cost endorsement?

The replacement cost endorsement is an extra layer of protection added to your auto insurance policy. It usually applies to new or very recent vehicles and is valid for a limited time, which varies by insurer (often between 2 and 5 years). If your car is a total loss or stolen, this endorsement helps you get a vehicle of the same make and model (if available) or a payout based on its original value, without any deduction for depreciation.

Replacement insurance, on the other hand, is a separate contract. It’s often offered by dealerships or some independent insurers. It can apply to new or recent used vehicles and offers protection against depreciation for a longer period (up to 7 or 8 years, depending on the product you choose). Depending on the terms, it can allow you to replace your vehicle with a new, equivalent model or receive a credit equal to the original price you paid at the dealership.

Key points to know about replacement insurance

Claim requirements

To make a claim under your replacement insurance, your primary insurance must first pay you out. You need to follow all the clauses in your policy and submit a complete file to the insurer. The payout amount depends on several factors, with the insurer considering your vehicle’s current value, among other things.

Choosing new parts and warranties

You can choose new, original parts, covered by the manufacturer’s warranty. Dealerships offer a wide selection and might even suggest a newer model. Generally, the warranty covers manufacturing defects.

However, always check the warranty’s length and conditions (for example, 12, 24, or 36 months). It might require professional installation and the exclusive use of original parts to stay valid. Some warranties also cover labor and repairs related to the initial defect, while others just replace the part itself.

Contract duration and renewal

The length of your replacement insurance contract depends on your goals and the type of vehicle insured:

• Common duration: 3 to 5 years — a popular choice that balances a stable premium with contractual flexibility.
• Renewal: Most contracts allow for a renewal at the end of the term; compare the conditions and rates offered upon renewal to avoid an unjustified premium increase.
• Early cancellation: Possible, but often comes with fees (premium balance compensation, administrative fees, proportional adjustment). Check how fees are calculated and the notice periods to assess the financial impact of cancelling early.

Practical tips:

• Document your needs (desired duration, budget, risk tolerance) before choosing your coverage term.
• Compare at least three offers, considering warranties, exclusions, deductibles, and cancellation penalties.
• Keep all written communication and ask for a summary sheet when you sign.

What are the benefits of replacement insurance?

Coverage against depreciation

A car’s value drops quickly over time. Replacement insurance protects you against this inevitable loss of value. If your vehicle is a total loss, your insurer will cover the difference between its value on the day of the incident and the cost of an equivalent new model. This means you won’t have to suffer the financial hit of your car losing its value.

This coverage also applies to partial losses, always ensuring you get the best possible protection for your investment.

Protection for equipment and parts

Replacement insurance goes beyond just protecting the vehicle itself. It also covers special options, accessories, and installed equipment. If you need to replace your car, you can choose a new vehicle from the dealership with all the same features you had before.

Damaged parts will be replaced with new ones, ensuring your new vehicle purchase is comparable to your old one in terms of quality and features.

Deductible reimbursement

An often-overlooked benefit of replacement insurance is the potential deductible reimbursement. Some policies include this clause, meaning you don’t have to pay a deductible if you make a claim.

We recommend checking this with your insurer when you sign up. This reimbursement can be a substantial saving, especially if your deductible is high.

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Frequently asked questions about replacement insurance

Which vehicles can benefit from replacement insurance?

Replacement insurance is available for a variety of vehicles. Whether you own the latest model, a used car, a recreational vehicle, or a demo car, this protection has you covered. It offsets depreciation by reimbursing the difference between the current value and the cost of a new vehicle bought from a dealership.

It is an addition to your main insurance, and you can cancel it for a fee. This gives you greater peace of mind for your car investment.

How do I get a payout for a stolen vehicle?

First, you need to contact your primary insurer to report the theft. Replacement insurance then steps in to cover the difference between the compensation received and the amount needed to buy a new vehicle. Your contract might include deductible reimbursement and temporary car rental. Your insurer will help you get back on the road quickly after such a stressful incident.

How does Sonnet handle total loss claims?

At Sonnet, we handle claims with care and provide you with a team of experts to guide you through every step of the process. Our claims service is available online, through our app, and by phone, with a 24-hour emergency line. We’re committed to making your claim process easy, whether it’s for a total loss or another type of incident.