Is Vehicle Replacement Insurance Worth It In Manitoba?

September 27, 2021

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Driving off the lot in your new car is exhilarating—as long as you don’t think too hard about the fact that, within a year, its value is likely to depreciate by up to 20%! Factor in a fender bender, damage, or vandalism, and all of a sudden, the car you bought at a brand-new price point is worth a lot less. And if it were to be written off at that point? You’d receive a cheque for significantly less than you paid. No matter how long ago that was!

Vehicle Replacement Insurance exists to save you from this potentially major financial loss. But, because it’s not included in regular car insurance policies, you do have to pay extra for it, which causes many Manitobans to pause and wonder if it’s really worth it. To help you decide, we’ve outlined all the key facts and information you need to know about Vehicle Replacement Insurance below.

What Is Vehicle Replacement Insurance?

Vehicle Replacement Insurance is a type of supplemental car insurance for new and used cars. With this coverage in place, if your car is totaled, you can rest easy knowing your insurance company will pay you enough money to get another car of the same make and model. Instead of cutting you a cheque for the value of your actual car, which, at that point, will have depreciated significantly! 

At Winnipeg Insurance Brokers Ltd., we offer two types of vehicle replacement insurance: New Car Protection from Manitoba Public Insurance, which covers your car for up to two years for depreciation, and Vehicle Replacement Insurance from Optiom Inc. The focus of this article will be on the products provided by Optiom Inc.

Optiom’s insurance protects the investment you’ve put into your vehicle by paying you the difference between the market value of your vehicle at the time of a loss and the Manufacturer Suggested Retail Price (MSRP) of a brand new, equivalent replacement vehicle. And, if you have to pay a deductible on your claim after your car is written off, it may also reimburse you for that! (Up to a certain dollar amount.)

Why? Because the medical costs you can incur outside of Canada pile up incredibly quickly! If you or someone you know has ever visited a doctor or hospital in another country, you know that even a minor concern when not covered by insurance can come with a major bill. 

Having the right amount of insurance is critically important while away—and the right amount of coverage typically comes from working with an insurance broker.

Is Vehicle Replacement Insurance Standard or Mandatory?

No, Vehicle Replacement Insurance is not standard or mandatory. It’s simply a top up option you can choose to add your primary insurance policy. (Your primary insurance policy is the one you secure, through Manitoba Public Insurance, which makes it possible for you to repair your vehicle and make it drivable again following an accident.)

How Does Vehicle Replacement Insurance Work?

Vehicle Replacement Insurance works in two ways:

  1. It removes any financial burden on you if your insurance settlement pays you less than the amount you owe to your bank, on your car loan.

  2. It fills the gap between the MSRP or black book value of your vehicle and the actual cash value of your original car at the time when it’s written off.

What’s The Difference Between Collision Insurance, Gap Insurance, And Vehicle Replacement Insurance?

Collision Insurance

Collision Insurance covers the cost of repairing your damaged or broken vehicle, to make it drivable again after an accident. You would use this insurance when your vehicle is damaged, but not totaled.

Gap Insurance

Gap Insurance covers the gap between your primary insurer’s pay out and the loan amount you owe. For example, if you paid $20,000 for your vehicle, but it was damaged beyond repair in an accident two years later, your insurer might only give you $10,000 due to depreciation. If you still had $16,000 left to pay on your car loan, without Gap Insurance, you would be out that extra $6,000.

Vehicle Replacement Insurance

Vehicle Replacement Insurance covers the financial gap a totaled car leaves behind in the way that Gap Insurance does. But, it also makes sure that, if your vehicle is beyond repair and written off, you receive enough money to buy a brand new version of that same vehicle.

How Much Does Vehicle Replacement Insurance Cost?

Vehicle Replacement Insurance costs approximately 1% of your purchase value. So, if you paid $20,000 for your car, you could expect this insurance to cost you less than $25/month. This is a very fair price when you consider the Vehicle Replacement Insurance protects your total investment on your vehicle!

Who Can Get Vehicle Replacement Insurance?

Every Manitoban who owns a new or used vehicle up to 10 years old qualifies for Vehicle Replacement Insurance! So as long as you have full collision and comprehensive primary auto insurance in place, you can secure this coverage for your new vehicle—regardless of whether you’re new to Canada, new to driving, or you have a poor driving abstract.

Does It Matter If My Car Is New Or Older?

No, it doesn’t matter if you have a new or an older vehicle, as long as your car is less than 10 years old. But, the age of your vehicle does change your protection a bit.

  • New Vehicles: Protection is valid for up to 7 years.
  • Used Vehicles: Protection is valid up to 5 years, depending on the model year.

How Can I Find Out If My Car Qualifies?

Typically, if your car is less than 10 years old, you will qualify! To make sure or get started, speak with our Insurance Consultants! They will be more than happy to review everything with you.

So, Is Vehicle Replacement Insurance Worth It?

Yes, 100%! With Vehicle Replacement Insurance, you’re paying just a little extra each month in order to ensure that, if your car is stolen or damaged beyond repair, you won’t lose money paying off your remaining car loan or buying a whole new vehicle. Even if the value of your original vehicle has depreciated.

How To Secure Your Own Vehicle Replacement Insurance

If you agree that Vehicle Replacement Insurance sounds like a fantastic idea, get in touch with us! We’ll give you a quote and help you secure your coverage.