The term “GAP Insurance” is not familiar to everyone today.
However, the relevance of this insurance product is undoubted, because it allows you to significantly increase theamount of compensation in case of loss of the car as a result of an accident or theft.
What is GAP insurance?
The concept of GAP insurance (Guaranteed Asset Protection) translates as “guarantee of preserving the value of the car.”
Compensation for such insurance is the difference between the value at which the car was purchased and the market value at the time of its loss, taking into account depreciation.
In fact, this type of protection allows you to receive a sum of money missing for buying a car of the same price category after paying a CASCO refund.
GAP and CASCO
GAP insurance is inextricably linked to CASCO. And this connection is as follows.
When calculating the amount of insurance payments for CASCO any insurance company must take into account the depreciation of the car.
During the first year of operation, it loses 20% of its original price, in the second – another 10–15%. Then every year the cost of the car will inevitably decreaseby 10%.
Thus, in the event of the death of the car and the payment of full compensation for CASCO, the owner will still not be able to receive an amount equal to the originalcost.
It is in order to cover or minimize this difference between the price of a new car and the amount of insurance payment, and there is GAP insurance.
Consider a simple example. Suppose someone bought a new car for 1,000,000 rubles and issued a CASCO policy. After a while, a big nuisance happens – the car dies in an accident or is stolen.
The insurance company pays compensation under the hull insurance policy taking into account depreciation in the amount of 800,000 rubles. However, if the owner has signed a GAP insurance contract when purchasing a vehicle, the difference of 200,000 rubles will also be reimbursed to him.
It should be understood that the actual depreciation starts to be taken into accountas soon as the vehicle leaves the dealership door.
That is, even if the car is stolen within a few hours after the purchase, the payment on the hull insurance will be only 80% of the originalcost of the car.
It is worth noting that the concept of “car death” means not only that it cannot be restored in the event of an accident, but also that its restoration is possible, but inexpedient for financial reasons.
There are 2 types of GAP insurance:
- financial. This type of insurance is applied if the car is bought on credit. In this case, the owner will receive an amount equal to the difference between the payments to be made under the CASCO agreement and the amount of the remaining debt to the bank;
- invoice. The owner receives an amount equal to the difference between the payment on the hull insurance and the cost of another car of the same model.
Thus, if a CASCO policy and GAP insurance are issued at the same time, in case of loss of the car, the owner will receive its full cost without depreciation. Most often, such an insurance product is used by those who buy a car on credit.
Such an additionalmeasure of protection will stabilize the financial condition in the event of damage and cover the debt to the bank.
However, before purchasing a product it is necessary to clarify whether the credit institution accepts it. The cost of insurance of this type will cost an amount equal to from 0.5 to 1.5 percent of the value of hull insurance.
This amount of the insurance premium is set by the insurance company and depends on the make of the car and its place in the rating of “stealing”. Driving experience, age and other characteristics of the policyholder for this amount do not affect.
Necessary conditions for GAP insurance
The GAP insurance contract can only be executed in the first year when you buy a car at the same time as the CASCO policy or during a certain periodestablished by a particular insurance company.
The contract can then be extended, but only during the term of the voluntary insurance policy.
But it is important to understand that if you extend the CASCO contract, you will not be able to purchase GAP insurance.
Some companies also limit the period in which the GAP policy can be purchased: often the offer is valid only in the first three months after the purchase of the car.
At the same time, insurance companies offer to issue a GAP for used cars that meet certain conditions. For example, insurance can take cars no older than 5 years, with a mileage of up to 100,000 km, costing up to 6,000,000 rubles, etc.
But in this case the fundamental moment is the drawing up of the GAP insurance only at the same time as the hull insurance or for a certain time after.
This measure is due to the fact that the value of the initial costof the vehicle, which is accepted for calculation, is determined by the value of the car specified in the voluntary insurance policy.
Summarizing the above, there are several options for acquiring GAP insurance:
- GAP is acquired simultaneously with CASCO at the time of purchase of a new or used car;
- GAP insurance is issued during the first year of operation of the car (new or used), which was acquired by CASCO when it was purchased.
Nuances of GAP Insurance
Despite the fact that many insurance companies position GAP as a product that fully covers thedifference between the purchase price of a car and its market value at the time of the insured event, this may not be quite so.
The fact is that the overwhelming majority of companies offering such a product, set the limit payments on GAP insurance policies.
The situation when the damage from the loss of the car is fully compensated is valid only for the first year of operation of the car after its purchase.
Consider the following example. Suppose the insurance company has a GAP limit of 200,000 rubles. Then the amount of insurance payments KASKO and GAP for a car worth 1,000,000 rubles for the first, second and third year of operation will be as follows:
|1st year of operation||2nd year of operation||3rd year of operation|
|The cost of the car, taking into account the wear (rub.)||850000||750000||650000|
|Payments for CASCO (rub.)||850000||750000||650000|
|Payment GAP insurance (RUB.)||150000||200,000||200,000|
|Total amount of payments (rub.)||1,000,000||950000||850000|
The table shows that with each subsequent year, the total amount of reimbursement is steadily decreasing, since with a decrease in the CASCO payment limit on GAP remains unchanged. And the higher the cost of the car, the more significant this difference may be.
In the event of a carjacking, the receipt for compensation under GAP is imperative to have a “full hull insurance”.
And when insuring against the risk of vehicle theft, many insurers require the mandatory installation of an anti– theft system.
GAP in Russia
To date, GAP insurance has not yet become widespreadin Russia. Some insurance companies limit the supply of this product only for cars of foreign manufacture, and many insurers, especially in remote regions of Russia, do not provideit at all.
The main document regulating the relations of the insurer and the policyholder in relation to the GAP insurance is a voluntary insurance contract, which specifies the rights and obligations of the parties, the possible amounts of payments, the procedure and terms for damages.
The provisions of the contract should not contradict the provisions of the Civil Code of the Russian Federation, as well as the Law of the Russian Federation of 27.11.1992 N 4015-1 “ On the organization of insurance business in the Russian Federation”, which is fundamental for all insurance activities in Russia.
Briefly about the main thing
- GAP product can be purchased only in the first year of operation of the car (new or used), having a validhull insurance, issued when buying a car;
- if it is planned to insure a car bought on credit, then it is worth checking with the bank whether it accepts GAP insurance;
- such insurance in combination with CASCO will cover the damage in one hundred percent if the insured event occurs in the first year after the purchase of the car. The total amount of compensation in subsequent years depends on whether the insurance company has set limits on GAP payments and on their value;
- the GAP agreement can be concluded at the same time for several years or its annual renewal ispossible ;
- in order to receive GAP payments in the event of car theft, it is necessary to have a “full CASCO” covering the risk of theft
- the cost of the product will be 0.5–1.5% of the cost of hull insurance.