A Guide to Purchasing GAP Insurance
Many motorists assume that their comprehensive motor insurance policy will cover the original price of their vehicle if it were to be written off, but this is not the case. A comprehensive insurance policy will only pay the current market value of the vehicle which could be thousands of pounds less. Depreciation can be as much as 35% after just one year of ownership and up to around 70% after three.
Fortunately, there is protection from this in the form of GAP insurance. This is an optional policy that will cover the shortfall between the insurance payout and the amount outstanding on the finance agreement or the amount originally paid. For example, if you purchased a vehicle for £19,000 and it was written off after 4 years of ownership then your insurer would only pay out around £6,650. The remaining £12,350 would then be covered by your GAP insurance provider – as you can see, without this you could be left thousands of pounds out of pocket without this protection in place.
Purchasing GAP Insurance:
The value of GAP insurance is clear, but where do you obtain it from? It will be offered to you from a dealership when you purchase a vehicle, but The Financial Conduct Authority recommend that motorists shop around and weigh up their options before making a decision. You will often find that the best deals and most flexible levels of cover will come from a specialist provider.
Types of Cover:
There are also three different types of GAP insurance to consider. Return to invoice will pay the difference between the insurer’s total loss payment and the exact price originally paid, whilst Return to value pays the difference between the total loss payment and the value of the vehicle when it was new (this is targeted towards those that purchased the vehicle in the used car market). Finally, vehicle replacement cover will pay the difference between the total loss payment and the cost of replacing it with buying a new car of the same model, spec etc. There are other variations if you purchased the vehicle on finance and when you use a specialist company you can tailor your policy to your specific needs.
GAP insurance is an intelligent purchase to make for motorists because without it you could be left severely out of pocket and without a replacement vehicle. It is unfortunate, but accents occur far too frequently and motorists need to take measures to protect themselves financially in case their automobile is declared a total loss.