If you have a car, you take great care of it. However, accidents can still happen due to other drivers on the road. Hence, we recommend you have car insurance. In addition to regular maintenance and safe driving practices, car insurance provides financial protection in case of accidents or theft. While car insurance policies offer coverage for various scenarios, additional options, such as GAP insurance and Return to Invoice (RTI) coverage, are available to enhance your coverage. Here, we will explore what GAP insurance is and the advantages it offers.
Meaning of GAP insurance
GAP insurance, short for Guaranteed Asset Protection, is optional coverage for car insurance policies. It is not currently available in India, but gets commonly offered in other countries. GAP insurance works best when purchased alongside collision insurance or comprehensive insurance policies. This coverage comes into play if your car is stolen or deemed a total loss due to an accident.
When a car is purchased, its value starts depreciating immediately. In the first year alone, the value of a car can depreciate by up to 20%. If your vehicle gets stolen or declared a total loss, the insurance company will typically compensate you based on the car’s depreciated value. However, if you have a loan or lease on the car, there may be a gap between the amount owed and the insurance payout.
Return to invoice
Although GAP insurance is not available in India, a similar concept called Return to Invoice (RTI) cover can be added to your existing comprehensive car insurance policy. RTI cover proves to be extremely useful in various scenarios.
In the unfortunate event of your car being stolen or damaged beyond repair, the RTI cover comes to your rescue. When you file a claim with RTI cover, the insurance company compensates you with the original invoice price of the car rather than the current market value which includes depreciation.
How does RTI work?
Insurance companies always refer to the Insured Declared Value (IDV) of the car for compensation in case of theft or irreparable damage. The IDV represents the maximum amount you can receive from your insurance company. In some cases, the IDV of the car might be lower than the invoice price, especially for older vehicles with higher depreciation rates. By opting for RTI cover, you can avoid any difference in compensation and receive the on-road price of the car if it gets stolen or damaged beyond repair.
RTI cover cost
Since the RTI cover is an add-on, you must pay an additional premium to include it in your existing comprehensive policy. The cost of RTI coverage largely depends on the car model and its current age. You can visit online insurance aggregator websites to get an idea of the possible premiums for RTI coverage. The premium for RTI coverage is around 10% higher than premiums for comprehensive car insurance policies.
Advantages of RTI Cover
Adding RTI cover to your policy offers several benefits:
● Better coverage
RTI cover enhances the coverage of your car insurance policy, providing improved security compared to a basic policy.
● Theft coverage
RTI cover provides comprehensive coverage in case of car theft, ensuring you receive the maximum compensation possible and giving you peace of mind.
GAP insurance for used cars
While GAP insurance is most commonly associated with new vehicles, some insurers do offer RTI for used cars, especially if the car is under a certain age and has a valid comprehensive policy.
However, most car insurance providers do not recommend GAP insurance for used vehicles that are more than 3-5 years old due to high depreciation.
Is GAP insurance worth it for used cars?
These are the things to keep in mind if you are considering GAP insurance for a used car:
● Replacement for total loss
In case of total damage, GAP insurance ensures you don’t bear a financial burden and can replace the car without extra out-of-pocket expense.
● Ideal for new cars
RTI is most cost-effective for new vehicles because it offers full invoice reimbursement when depreciation is highest during the first few years.
● Total damage protection
RTI helps in instances of total loss from natural calamities, fire, accidents, etc., where the damage is beyond repair.
● Own damage coverage
While third party car insurance is a legal mandate, it is only for the third-party liabilities, and is useless in case of own damage. RTI works as an add-on to own damage policies and provides much broader financial protection.
Conclusion
While GAP insurance is not currently available in India, the concept of Return to Invoice (RTI) cover provides similar benefits. By adding RTI cover to your comprehensive car insurance policy, you can receive compensation based on the original invoice price of your car in case of theft or irreparable damage. RTI cover offers better protection and security and helps you avoid the impact of depreciation on your compensation. It is particularly beneficial for new cars and provides peace of mind to car owners. Although it may increase your policy premiums slightly, the advantages of RTI coverage make it a valuable addition to your car insurance policy.
Disclaimer: The information provided in this blog is for educational and informational purposes only. It may contain outdated data and information regarding the Insurance industry and products. It is advised to verify the currency and relevance of the data and information before taking any major steps. ICICI Lombard is not liable for any inaccuracies or consequences resulting from the use of this outdated information.