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Understanding waiver of depreciation coverage
Waiver of depreciation coverage is an endorsement that is available for new vehicles, demos within a certain driven range (in kms), or certain used vehicles within a specific age range.
With this coverage, in the event of an accident where the vehicle is a total loss or an unrecovered theft, depreciation is not taken into account when determining the claim payout. It will instead be based on the lowest of:
- The actual purchase price,
- The manufacturer’s suggested list price at the time of purchase, or
- The cost of replacing the car with a new car of the same make or model that is similarly equipped
Without waiver of depreciation coverage, the payout is determined by the actual cash value at the time of the loss, which would take the depreciation on the vehicle into account.
You may know the saying, "When you drive a vehicle off the lot, you automatically lose 10% of the vehicle’s value." However, the amount owing on a loan remains the same. This endorsement protects you against that depreciation in the event of a loss where the coverage would be applied to help ensure that you come out of the loss with a clean slate.
Waiver of depreciation vs. gap insurance
It is common when you lease a vehicle to be offered “gap insurance” through the dealership or lender. This is more commonly becoming mandatory for any lessor if the depreciation waiver is not taken. This coverage acts similarly to waiver of depreciation coverage, where in the event of a total loss or unrecovered theft, the "gap" between the actual cash value or payout for the vehicle is covered. If you have already accepted gap coverage/insurance through the dealership, then waiver of depreciation coverage would become redundant.
How to determine coverage
In any situation where your vehicle is eligible for waiver of depreciation coverage, you should add it to your policy. It can be removed from your policy at any time, so it is best to include the endorsement right away when you add your new vehicle. You can always remove it later if it is deemed unnecessary.
If you are a current OTIP policyholder, contact us at 1-833-615-9329 to review your existing auto insurance policy. If you’re not insured with OTIP and are shopping for auto insurance, call us at 1-833-494-0085 to get a quote and receive a $20 gift card of your choice!