I have a 2011 subaru outback that needs a new engine due to an oil leak. The dealer claims subaru does not recommend replacing engines. Is replacement reasonable?

If the insurance will pay for a new engine, go for it. Replace the engine and then sell it if you want another car. That's ridiculous that they recommend NOT replacing a bad engine. I also would not use the dealer, they will charge thousands more than another reliable shop.

If they will cash you out I would probably take the money and buy a new car but I would have to know all the details before I could say for sure.

Hmm, how much cash do you really think they would offer? What insurance company are you talking about....I presume it's not Subaru? How many miles are on the car?? The insurance company doesn't know about Subaru's recommendation/ argument for not rebuilding... get Subaru to write a letter to the insurance explaining that... It's a compelling reason for getting more money. then take the money and get a remanufactured engine..... putting a replacement is less expensive than trading to a different car. Good luck.