According to the Autorité des Marchés Financiers (AMF), replacement insurance purchased through a car dealer is more expensive.
*Source: 2013 annual report on financial institutions (in French only). The AMF released this statement to help ensure consumers are treated fairly.
“Investigations and other work have led to the sanctions announced today regarding several automobile dealers and one damage insurance firm…” said Louis Morisset, President and CEO of the AMF. “The fair treatment of consumers is of concern to the AMF so we are giving them advice to help them make more informed decisions when they buy insurance products relating to the purchase or lease of an automobile,” he added.
When you purchase or lease a vehicle long-term, the dealer may offer you replacement insurance. If you have this insurance and your vehicle is declared a total loss, it will be replaced by a new one with the same features, equipment and accessories. In the case of a partial loss, this insurance covers you for the replacement of parts that cannot be repaired with new original equipment manufacturer parts. Your insurer can offer you a similar product known as “replacement cost insurance”. When you buy or lease a vehicle, you may have to choose between replacement insurance and replacement cost endorsement.
Become informed on the benefits and make a decision based on your particular situation and needs. For example, if you have put money down on the car and it is financed, find out what happens to that money in the event of a total loss. For leased vehicles, you should also find out if your vehicle has a gap clause in the contract and what that means. These are just some of the questions that help you make an informed decision. We’ve included information below to help you understand the differences between the different types of replacement insurance available.
As licensed insurance brokers, we offer our clients both products and can discuss the various options with you if you need help understanding the options.
The choice is yours!
Replacement cost endorsement
On purchase or lease
|Replacement cost endorsements are sold only by damage insurance agents or brokers.||Replacement insurance policies are sold by damage insurance agents or brokers and car dealers.|
|Insurer is the same as for your car insurance policy.||Insurer is not necessarily the same as the insurer who issued your car insurance policy.|
|Price is fixed for the same term as your insurance policy.||Price is fixed once, at the time of purchase.|
|Premium varies based on all factors used by insurers. The value of the vehicle, but also personal information such as your driving record.||Premium varies based only on the term of the policy and the value of the vehicle.|
|Premium is included in the automobile insurance premium.||Premium can be financed through an automobile loan.|
When a loss occurs
|You can choose a dealer to replace your vehicle.||Replacement depends on the option chosen when the policy was purchased. Ask the car dealer or insurance agent or broker about the two available options.|
|Choice of indemnity option is made at the time of the loss: replace the vehicle or receive a cash amount.||Replacement of the vehicle is mandatory.|
|Your vehicle is replaced by a new or equivalent vehicle with the same equipment and accessories.||Your vehicle is replaced by a new vehicle of the current year with the same equipment and accessories.|
|In the case of a partial loss, parts that cannot be repaired are replaced with new original equipment manufacturer parts.||In the case of a partial loss, parts that cannot be repaired are replaced with new original equipment manufacturer parts.|
|A deductible is generally payable.||Replacement insurance reimburses the deductible payable to the primary insurer of the automobile.|
|Expenses incurred to lease a vehicle are reimbursed in certain cases. This endorsement covers expenses incurred for leasing a car following a covered loss.||Expenses incurred to lease a vehicle are reimbursed for any covered loss.|
|Replacement cost endorsement can be renewed at the same time as the policy, at the conditions set by the insurer.||Replacement insurance policy is sold for a fixed term.|
When insurance ends
|If your vehicle is declared a total loss, your policy does not necessarily end, because another vehicle could be covered by the same policy.||If your vehicle is declared a total loss, the policy ends.|
|You can cancel your policy at any time by notifying your insurer in writing. You will be reimbursed for the unused portion of your premium, less a penalty.||You can cancel your policy at any time by notifying your insurer in writing. You will be reimbursed for the unused portion of your premium, less a penalty.If you purchased the insurance from a car dealer, you can terminate your insurance within 10 days without penalty.|
|Insurer can cancel the policy, including the replacement cost endorsement, if there is a material change in risk or if you do not pay your insurance premium.||Insurer can cancel the policy only if you do not pay your insurance premium.|