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Car insurance: Replacement cost coverage or replacement insurance?

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If you’ve just bought a car, you may be hesitating between replacement cost coverage and the replacement insurance available from your dealer and other insurers. 

Here’s some useful information to help you with your choice. 

For more info to guide your decision, read our blog post Buying a new car? Opt for replacement cost coverage! or see the coverage we offer on the car insurance website.
What is replacement cost coverage?

Normally, replacement cost coverage is optional coverage available in the form of an "endorsement” added to your car insurance policy. In the event of a covered loss, this endorsement allows you to avoid depreciation costs when your vehicle is repaired or when it is replaced with an identical or similar vehicle should it be declared a “total loss.” Depending on the insurer, this option may be available for new vehicles only, or for new and low mileage vehicles. 

Why opt for replacement cost coverage? 

A car can lose up to 50% of its value within the first three years. That’s a lot! You may want to consider this endorsement if you:

Buy a new vehicle 
Rack up a lot of mileage
Change cars regularly
Lease your vehicle 

If any of these situations apply, replacement cost coverage is a great option for you! 

How does replacement cost coverage affect your premium?

The coverage is offered on an annual basis, not for the life of the car. You can renew or cancel the coverage at your discretion.
Replacement cost premiums are based on various aspects of your policy and are specific to each insurer. In addition, the cost increases with the age of the vehicle. 

Factors influencing the cost include:

Vehicle model
Vehicle value
Your driving record and claim history

What is replacement insurance? 

Replacement insurance (QPF 5) is insurance that is added to your basic QPF 1 car insurance.Available from certain insurers and car dealers, it compensates for the cost of replacing your vehicle at the dealer of your choice. However, replacement is compulsory. 

What are the main differences between replacement cost coverage and replacement insurance?

Chambre de l'assurance de dommages has identified a number of differences between the types of coverage. 

Purchasing coverage

Replacement cost endorsement: Available from damage insurance agents and brokers.

Replacement insurance: Available from damage insurance agents and brokers and car dealers.


Replacement cost endorsement: The annual premium is included in your car insurance premium. Payment can be spread over 12 months. Premiums are usually lower than for replacement insurance. 

Replacement insurance: Replacement insurance premiums are fixed for the duration of the insurance contract. They can be financed under your vehicle financing contract. For replacement cost coverage, the premium is adjusted every year upon renewal to take the age of your vehicle into account. 

Duration of coverage

Replacement cost endorsement: Total duration of the coverage varies from four to five years, depending on the insurer. On your annual renewal, you decide whether to keep the additional coverage or not.

Replacement insurance: You choose the term, from one year to a maximum of eight years. You can cancel any time. 


Replacement cost endorsement: Usually the deductible is paid by the insured.

Replacement insurance: The deductible is reimbursed by the insurer up to the amount provided for in QPF 5. 

That’s it! You now have more information to help you decide between a replacement cost endorsement or replacement insurance. For more details, see the article Replacement Cost or Replacement Insurance? on the Chambre de l’assurance de dommages website. To request a quote from Promutuel Insurance, visit our Car Insurance page.