Purchasing a new or used vehicle is a significant investment, and no one likes to see its value drop drastically in the first year. Yet, this is often what happens: depreciation can reach up to 25% in the first few months. In the event of an accident or theft, this can lead to considerable financial loss, even if your standard auto insurance is in effect. This is where replacement insurance comes in. It protects you against this loss of value, whether you have a new or used vehicle. The experts at J. Gérard Fortin & Associates can help you choose coverage that allows you to drive away with an equivalent vehicle, without unpleasant surprises. Whether you’re a victim of theft or an accident causing total or partial loss, this insurance ensures you maintain full purchasing power for your vehicle. In short, it’s the best way to secure your automotive investment.
The F.P.Q. No. 5 replacement insurance is available for both new and used vehicles, provided you already have an auto insurance policy. For new vehicles, it allows you to replace your car with a model of the current year in case of total loss or theft and provides original manufacturer parts in case of partial damage. For used vehicles, it allows you to index the insured value according to the contract conditions, for a period of up to 7 years. You remain protected against depreciation, regardless of your vehicle’s age.
Another crucial point in choosing your protection is where you purchase your replacement insurance. While it’s possible to do so at a dealership, this option is often much more expensive. By opting for a broker like J. Gérard Fortin & Associates, you can save an average of $675 according to data from the AMF. Additionally, you gain freedom: you can have your vehicle repaired or replaced wherever you want and choose the brand that suits you, without obligation to the dealership. Our brokers will guide you in selecting flexible coverage tailored to your budget, needs, and driving habits.
Before purchasing replacement insurance from your dealership, it’s essential to ask the right questions and obtain certain information in writing. This will allow you to make an informed comparison between their offer and the one proposed by your broker.
Here are the items you should ask them:
What is the exact duration of the proposed replacement insurance?
What is the duration of my automotive financing contract?
What is the monthly premium amount, including the applicable 9% tax on auto insurance?
What will be the total cost of the replacement insurance at the end of my financing?
Additionally, since the dealership is not a certified insurance representative, they are required to provide you with a Distribution Guide. This document contains the details and conditions of the replacement insurance they offer. Be sure to ask for it to fully understand what you’re purchasing.
Choosing an insurance broker like J. Gérard Fortin & Associates for your replacement insurance offers several significant advantages:
Here are some important points from the “Distribution Guide” provided by dealers (page 1), often overlooked but essential to understand before purchasing replacement insurance:
These three points are part of ten violations identified by the Autorité des marchés financiers (AMF), which resulted in fines totaling $117,500 imposed on nine Quebec dealers on February 16, 2015.
Replacement Insurance (FPQ No. 5) offers more comprehensive, stable, and advantageous protection than the New Value Endorsement (FQÉ No. 43). Here’s why:
Replacement Insurance is valid for the agreed-upon duration, regardless of the number of claims (whether partial or total loss). In contrast, the New Value Endorsement is not guaranteed: the insurer can cancel or refuse to renew it if they deem the risk has changed.
The premium for Replacement Insurance is fixed and guaranteed for the entire contract period (up to 84 months). By comparison, the premium for the New Value Endorsement can increase at each renewal, sometimes significantly, depending on the evolution of your file.
Replacement Insurance reimburses your deductible in case of a claim:
Up to $250 for a partial loss
Up to $2,500 for a total loss
You are covered up to $75/day, $2,250 in total, from the first day of the claim, even without having the FAQ No. 20 endorsement. Replacement Insurance ensures you have a similar vehicle during repairs or until compensation.
In case of a total loss, Replacement Insurance compensates you based on the price of a new vehicle of the current year, equivalent to the one you had. Conversely, the New Value Endorsement may compensate you for a vehicle from the previous year.
If you purchased a new vehicle, Replacement Insurance covers original manufacturer parts, including glass. It pays the difference between their value on the day of the claim and their new price. The New Value Endorsement does not guarantee original manufacturer glass.
Replacement Insurance can be subscribed for a duration of up to 84 months (7 years). Conversely, the New Value Endorsement is limited to 60 months, or up to 71 months by exception (to accommodate completing an insurance year).
When you buy a vehicle, there is a good chance the dealer will offer you replacement insurance. Should you accept it immediately or rather consult a damage insurance broker? Here is a clear comparison to help you make an informed decision.
Insurance Broker |
|---|
| Less Expensive Insurance will cost you on average $675 less with your broker, according to an AMF report (2014). |
| Freedom to Choose You can choose the brand and dealer of your choice for your replacement vehicle. No obligation to buy at the same place. |
| Insurance Expertise Your broker is a certified professional, governed by strict laws, a code of ethics, and supervised by the ChAD. |
| Simplified Claims Only one insurer involved, only one file to manage. |
| Enhanced Public Protection In case of issues or fraud, you are protected by the Financial Services Compensation Fund of the AMF. |
Car Dealer |
|---|
| More Expensive On average $675 more, according to the same AMF report. |
| Limited Choice Some contracts require you to buy back your vehicle from the same dealer, often at a higher price. |
| Automotive Sales Expertise The dealer is an expert in selling vehicles, not insurance. Entrusting your financial protections to a salesperson—is that really a good choice? |
| More Complex Claims Often two insurers and two files to handle. The process can take longer. |
| Limited Protection Dealers are not regulated by the LDPSF. You do not have access to the compensation fund in case of dispute or fraud. |
Source: Chambre de l’assurance de dommages
Yes, in most cases, you can subscribe to replacement insurance even if your vehicle has an accident history. However, certain conditions may apply depending on the nature of the past damages and the vehicle’s value. Our experts can advise you on this.
This depends on the specific terms of the contract. Some types of coverage may include original or added accessories after purchase, while others exclude them. It is important to discuss this with your broker to ensure everything that matters to you is properly protected.
In some cases, it is possible to transfer your replacement insurance to a new vehicle, but this depends on the terms of the initial contract. It is recommended to contact a broker at J. Gérard Fortin & Associates to confirm this possibility and make the necessary adjustments.