What is GAP insurance: concept, definition, types, drawing up a contract, rules for calculating the coefficient, insurance tariff rate and the possibility of refusal

2024 Author: Howard Calhoun | [email protected]. Last modified: 2023-12-17 10:16

Auto insurance is a fairly common form of insurance worldwide. The most famous and applicable in the Russian market are OSAGO and CASCO insurance, while there are a lot of additions and innovations in the international auto insurance arena. 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 the GAP insurance. What is GAP Insurance?

The concept of GAP insurance

GAP is a foreign abbreviation, the full name sounds like Guaranteed Asset Protection, which means "Guaranteed Asset Protection" in Russian.

As a definitionof the very concept of GAP-insurance, we can say that this service allows the insurer to provide insurance coverage for the difference between the initial cost of the car and the real one (taking into account wear and tear) at the time of the occurrence of the insured event under CASCO - theft or total destruction of the car. And the client in this case receives an insurance compensation equal to the cost of a new car of a similar model and brand.

In fact, CASCO payments are almost always made taking into account the actual depreciation. And the amount of payment for the risks of "hijacking" or "complete destruction of the car" will be equal to the market value of the car, and not the amount of the cost of a new car. Surely not everyone knows that when leaving the salon, the car loses 20% of its value as a standard, i.e. its market value will already be 20% lower. And when insuring CASCO, this difference will be taken into account in the calculation of the sum insured at the time of conclusion of the contract. So what is GAP insurance? And how does this insurance work?

The essence of GAP-insurance

This additional insurance is easier to understand with an example.

Let's imagine that a new car in the showroom was purchased for 1,000,000 rubles. At the moment when the car left the territory of the salon, its cost became 800,000 rubles. Further, the owner of the car purchased a CASCO policy with a certain list of risks, including the “theft” (or theft) and “total destruction” options. The amount of the maximum CASCO payment cannot be higher than the market value of the car, taking into account depreciation. Throughhalf a year the car was completely destroyed in an accident, with a conclusion about the impossibility or inappropriateness of restoration. 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. No GAP insurance.

The owner of the destroyed car buys a new car, while he has 800,000 rubles. (payment by the 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 prove to be a problem for an indefinite period of time.

2. With GAP insurance.

Payment for CASCO is similar to the first option, i.e. 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. That's what GAP insurance is.

The advantages of the second option are obvious. However, not all so simple. Insurance companies are not yet very active in 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.

Types of GAP insurance

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 not invoice.

In essence, this view is reflected in the previous example. That is, when it comes to insuring a new personal car. In this case, upon the occurrence of insured eventsGAP insurance covers the difference between the CASCO payment, taking into account wear and tear, and the cost of a new car. According to the example, this is 200,000 rubles.

2. GAP invoice.

This type is used for cars bought on credit. Considering that every year a car loses about 10-15% in value, in 2 years it will fall in price by 1/3. Suppose it was after 2 years of operation that an accident occurred with the death of the car. The amount that the insurer will pay under CASCO is most likely not enough to pay off the loan debt for a car that no longer exists. GAP insurance will cover the difference between the CASCO payment and the actual amount of debt to a credit institution. As you can see, we are not talking about buying a new car here. The goal is to return the debt to the bank in full with GAP-insurance.

Terms of buying GAP-insurance

GAP insurance can only be issued as an addition to the CASCO policy. It is not offered as a separate type of insurance. And if a CASCO policy as a voluntary type of insurance can be bought in almost every insurance company that sells auto insurance and has certain ratings, then only a few insurers offer GAP insurance on our market. Before going to the insurance company, it would not be superfluous to obtain 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, more often only for those bought on credit. Moreover, if in the first year CASCO was issued without this addition, thenmost 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 along with CASCO, then it will be possible to use this service in subsequent years. However, here, too, there are restrictions individually with the insurer.

How is the cost calculated and what does it depend on?

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 thefts and participation in accidents of various makes and models of cars. In accordance with these indicators, insurers calculate their risks for payments, hence the tariff is formed.

Conclusion of the contract

If, nevertheless, a decision is made to purchase such an addition to CASCO, then before drawing up a GAP insurance contract, you must familiarize yourself with the terms of the insurer in detail. Often, all the negative experience of insurance arises from a negligent attitude to the study of this aspect. All essential parameters of the transaction, terms of payments, 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 CASCO. It will also show wear and tear. And if the insurance agentthe sale “forgot” to tell about it, and the client inattentively read or did not read the contract and insurance rules at all, then the amount of payment in case of theft or death of the car can become an “unpleasant” surprise for the client.

Option to opt out of GAP insurance

To the question "Can I opt out of GAP insurance?" - the unequivocal answer "Yes, it is possible". After all, this addition, like the purchase of the CASCO policy itself, is not mandatory, this is a voluntary decision of the car owner. Moreover, as mentioned above, insurers themselves are not very eager to sell this option, especially to everyone in a row. There are a lot of restrictions. Therefore, the imposition of GAP-insurance is practically excluded.

We figured out what GAP insurance is and how to opt out of it. And if, nevertheless, there is some pressure from the side of the insurer or credit institution towards concluding an agreement for an addition to CASCO in the form of GAP, the client will be able to determine his line of conduct 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 undoubtedly advantages in this supplement. They are expressed in the fact that the owner of the car has guarantees to be without significant financial losses in the event of the 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 financial obligations to the creditorganization will be fully repaid. And as to whether it's worth buying, it's everyone's personal choice.