Why you need it: Your vehicle loses value every year mostly just from wear and tear – also called depreciation. Under a standard policy, your car will only be covered for what it’s worth today, not necessarily what it would cost to repair or replace it. Meaning, you’ll be paying out-of-pocket for the difference.
What it covers: With vehicle replacement coverage, vehicles five years or newer are covered for repair or replacement without any adjustment for depreciation. This means, in most provinces (except Alberta) your insurer would pay the lesser of either: the original purchase price, the manufacturer's suggested retail price (MSRP) or the replacement cost of the same make & model today.