Auto insurance policies pay total loss claims according to market value of the insured vehicle on the day of loss. This means depreciation affects the claim settlement. In turn, the amount you receive for the totaled vehicle will be less than the price of a brand new car.

The 'new car replacement' endorsement addresses this issue by changing loss settlement terms to allow a claim payout based on the cost of a brand new car of the same make and model as the totaled vehicle. Check the policy's physical damage deductibles to confirm your out-of-pocket responsibility.

Many auto insurers offer this add-on, but eligibility, restrictions and prices vary. In general, 'new car replacement' is for new cars that have comprehensive and collision coverage.

Look for restrictions removing the endorsement after a specific time period (often 1 - 3 years) or when mileage exceeds a certain limit (often 15,000 - 24,000 miles). Get specific cost and coverage details about 'new car replacement' from your local auto insurance agent.