Do you need GAP insurance?
Vehicle theft has risen by 30% in the last year and an average of £384,000 cars are written off annually in the UK. With events like these on the rise, it is vital that motorists understand what is and isn’t covered by their motor insurance.
Usually, your insurers will only pay out what the car is worth at the time of the incident which is likely to be much less than the amount you paid when you bought it when it was brand new – according to the AA, new cars can lose up to 40% of their value after their first year and 60% in the first 3 years.
What is GAP insurance?
GAP insurance protects you when you make and insurance claim and receive a pay-out that’s less than the amount that you paid for the car when you bought it – it will pay you the difference and saves you from loosing money.
It’s mostly associated with new cars, although you can also buy GAP insurance alongside a second-hand cars under seven years old – after this the car is deemed old and insurance companies will not cover the gap.
Why have GAP insurance?
It is estimated that 20% of all car owners who have their car written off or stolen still have some years remaining on a finance contract or hire agreement. If this is the case, you could be stuck making repayments for a vehicle you no longer have. And if you paid outright, you will be seriously out of pocket. In both scenarios, you may not be able to afford to replace the car with a similar, new model. Taking out a GAP insurance policy prevents these scenarios from happening.
Three main types of GAP insurance:
- Return to invoice
This type of cover pays the difference between your car insurer’s maximum or “total loss payment” and the exact price you paid for the car.
- Return to value
This pays the difference between your insurer’s maximum payment and the value of the car when it was new.
- Vehicle replacement cover
This type of cover is aimed at car owners who bought their car second hand and it pays the difference between the insurer’s total loss payment and the cost of replacing it with a new car of the same model, make and specifications.
Other variations of the GAP insurance include cover to clear your outstanding debt if you bought the car with a loan, or if you have entered into a leasing contract which leaves you with outstanding financial commitments.
You do not have to buy GAP cover from a car dealer, there are a number of specialist firms that can provide it. Contact Tarian for more information on how we can help you.