Car insurance is a fairly common form of insurance worldwide. The most well-known and applicable in the Russian market are CTP and CASCO insurance, while in the international arena of auto insurance there are a lot of additions and innovations. In pursuit of competitive advantages, insurance companies are increasingly striving to expand the range of services offered, therefore, adopting the experience of foreign colleagues, they introduce and adapt some relevant auto insurance programs in the domestic market. An example of such a program is GAP insurance. What is GAP insurance?
The concept of GAP insurance
GAP - a foreign abbreviation, the full name sounds like Guaranteed Asset Protection, which in translation into Russian means "Guaranteed Asset Protection."
In the form of a definition of the very concept of GAP insurance, it can be said that this service allows the insurer to provide insurance coverage for the difference between the initial cost of the car and the real (taking into account wear and tear) at the time of the insurance event for CASCO - theft or total destruction of the car. And the client in this case receives insurance compensation equal to the cost of a new car of the same model and brand.
In fact, CASCO payments are almost always made taking into account the actual depreciation depreciation. And the amount of risk compensation “theft” or “complete destruction of the car” will be equal to the market value of the car, and not the sum of the cost of a new car. Surely not everyone knows that when leaving the car, the car loses 20% of its value as a standard, i.e. its market value will be already 20% lower. And with CASCO insurance in calculating the sum insured at the time of conclusion of the contract, this difference will be necessarily taken into account. So what is GAP insurance? And how does this insurance work?
The essence of GAP insurance
The essence of this additional insurance is easier to understand with an example.
Imagine that a new car in the cabin was purchased for 1 million rubles. At that moment, when the car left the territory of the cabin, its cost became 800,000 rubles. Further, the car owner purchased a CASCO policy with a certain list of risks, including the options “hijacking” (or theft) and “total destruction”. The size of the maximum payment under CASCO cannot be higher than the market value of the car, taking into account depreciation. Six months later, the car was completely destroyed in an accident, with the conclusion that it was impossible or inexpedient to recover. The insurance company will pay 800,000 rubles. But a new exactly the same car in the same salon costs 1,000,000 rubles.
There are two options for the development of events after payment:
1. Without GAP insurance.
The owner of the destroyed car buys a new car, while he has 800,000 rubles. (payment of insurance company). The remaining 200,000 rubles. he pays himself. If such an amount is not available, then he walks until he finds these funds. It's no secret that this can be a problem for an indefinite period of time.
2. In the presence of GAP insurance.
Compensation under CASCO is similar to the first option, that is, equal to 800,000 rubles. But the missing 200,000 rubles. to buy a new car ... the insurance company also pays as a second payment. This is what GAP insurance is.
The advantages of the second option are obvious. However, not all so simple. Insurance companies are not very actively offering this type of insurance to car owners. There are a number of restrictions and requirements on their part. This is understandable - no one wants to work at a loss.
GAP Insurance Types
To understand these subtleties, you need to start with the types of GAP insurance in CASCO.
There are two types on the Russian market:
1. GAP is not an invoice.
In essence, this view is reflected in the previous example. That is, when it comes to insurance of a new personal car. In this case, upon the occurrence of insurance events, the GAP insurance covers the difference between the CASCO payment taking into account depreciation and the cost of a new car. According to an example, this is 200,000 rubles.
2. GAP invoice.
This type is used for cars purchased on credit. Considering that every year a car loses approximately 10-15% in value, in 2 years it will fall in price by 1 \ 3. Suppose that after 2 years of operation an accident occurred with the death of a car. The amount that the CASCO insurer will pay is most likely not enough to pay off the loan debt for a non-existing car. GAP insurance will cover the difference between the CASCO payment and the actual amount of debt to the credit institution. As you can see, we are not talking about buying a new car. The goal is to repay the full amount of debt to the bank with GAP insurance.
GAP insurance purchase conditions
GAP insurance can be issued only as an addendum to the CASCO policy. As a separate type of insurance it is not offered. And if CASCO policy as a voluntary type of insurance can be bought at almost every insurance company that sells auto insurance and has certain ratings, then only some insurers offer GAP insurance in our market. Before going to the insurance company, it would not be out of place to get information from numerous open sources.
There is one more important nuance. As a rule, GAP insurance is offered for new cars when buying a CASCO policy, most often only for those purchased on credit. Moreover, if in the first year CASCO was issued without this supplement, then most likely, insurers will refuse to issue this option in subsequent years. It is necessary to apply for a new car immediately in the first year with CASCO, then it will be possible to use this service in subsequent years. However, here, there are restrictions individually with the insurer.
How is the price calculated and on what?
The cost of such insurance is usually low. It ranges from 0.5 - 2.5% of the cost of the CASCO policy, with which, in fact, this insurance is purchased. Such a run depends primarily on the make and model of the car. Insurers have constantly updated statistics on the number of hijackings and the participation in traffic accidents of various brands and models of cars. In accordance with these indicators, insurers calculate their payment risks, hence the tariff is formed.
Conclusion of an agreement
If, nevertheless, a decision has been made to purchase such an addendum to CASCO, then before drawing up a GAP insurance contract, it is necessary to familiarize yourself with the terms of the insurer. Often, all the negative experience of insurance arises from neglect of the study of this aspect. All essential transaction parameters, payment conditions, exclusions from insured events are specified in the insurance rules of the GAP insurer. This is the first document to be read. For example, every year the amount of coverage for GAP will decrease, as well as for hull insurance. It will also reflect wear. And if the insurance agent during the sale “forgot” to tell about it, and the client inattentively read or did not read the contract and insurance rules, the size of the payment during the theft or death of a car can be a “unpleasant” surprise for the client.
Ability to opt out of GAP insurance
To the question “Can I refuse GAP insurance?” - The unequivocal answer is "Yes, you can." After all, this addition, as well as the purchase of the CASCO policy itself, is not mandatory, it is a voluntary decision of the car owner. Moreover, as already mentioned above, insurers themselves are not very keen to sell this option, especially to everyone in a row. There are tons of limitations. Therefore, the imposition of GAP insurance is practically excluded.
We figured out what GAP insurance is and how to refuse it. And if, nevertheless, there will be some pressure from the side of the insurer or the credit institution towards concluding an agreement on addition to CASCO in the form of GAP, the client will be able to determine the line of his behavior and make the right decision.
Conclusion
As a conclusion about what GAP insurance is and whether it is worth buying, we can say that there are undoubted advantages in this supplement. They are expressed in the fact that the owner of the car has a guarantee to be without significant financial losses in case of loss of the car. If the car is personal, then buying a new one will not require additional investments and loss of time. If the car is pledged (in the case of credit cars), then the financial obligations to the credit institution will be fully repaid. And as to whether to buy, it is everyone’s personal choice.