The maximum a policy will pay out when you make a claim is normally the market value of your car at the time it was damaged or stolen. New cars can lose up to 30 per cent of their value in the first year. So, if your car was stolen during this time and not recovered, or damaged beyond repair, you could end up with a lump sum that' s a lot less than the cost of an identical car.

You can avoid this potential problem by choosing a policy that offers new-for-old cover. This will replace your car with a brand new one if it's stolen or severely damaged within the first 12 months. But the level of cover varies. For example, most insurers provide a brand new replacement car if the cost of repair exceeds 50 to 60 per cent of the list price of the car at the time of the claim. But some policies use a figure of 70 per cent. Also, some insurers won't provide a new replacement car if you've done more than a specified number of miles.