Gap Insurance vs Car Insurance: Getting Cover You Didn’t Know You Need
When purchasing car insurance, chances are you know all about what is covered, about third-party fire and theft, no claims bonuses and comprehensive cover. However, do you know about the massive loss you could see in your cover if your car is a total write-off or stolen and not recovered. Here, a lesser-known product to the car insurance market is GAP insurance.
What Is GAP Insurance & How Does It Work?
A car typically depreciates the moment it leaves the showroom or reseller, and continues to depreciate year after year. Let’s say for example that you purchased a car then, a year or two later, it’s written off. Your motor insurer will pay a settlement amount equivalent to the market value on the day it was written off.
That means you could well be out of pocket by a significant amount… and if you financed your car, leased it, or took out a contract hire agreement, your outstanding balance could be even more when you take early settlement costs and interest into account.
If you had Gap Insurance however, this amount would be covered, subject to the policy terms, and you’d be left free of this debt to look for a replacement.
Related Reading: Click4Gap Ranked #1 On MoneySavingExpert For Gap Insurance
For example, if you paid £16,500 cash for your car and a year or so later it’s declared a total loss, after your motor insurance pay-out you could have a shortfall of as much as £5,300. If you have Gap Insurance, this shortfall would be covered in total up to an amount of £50,000, subject to the policy terms, plus up to £1,500 for dealer-fitted accessories and £250 towards your motor insurance excess.
GAP Insurance For PCP & HP Vehicles
Gap insurance is extremely beneficial for cars that have outstanding finance payments, especially where there is a minimum final payment agreement in place. Further, with some enhanced policies, it is possible to insure yourself for any additional costs that are required to get you back on the road with a vehicle to the same exact specification as yours held at the point of purchase.
Do I Need GAP Insurance?
Although GAP insurance is less well known, it is vital for many people who could not afford the financial hit of a loss in pay out due to depreciation. Many people don’t realise either a) the level of depreciation cars suffer, or b) understand that it isn’t covered on their standard car insurance policy.
Simply, if your car becomes written off, either through an accident or theft, your standard car insurance cover will only cover your vehicle up to the value it held at the point of being declared as a total loss. As such, where there are finance commitments to repay, this can mean you get a pay out substantially less than what you have left on the vehicle. So, it is definitely worth considering purchasing Gap Insurance if you bought a car on Finance such as with PCP or HP.
In this instance if your car is written-off or stolen and the value of the vehicle is less than that owed to your Finance company, it would require you to pay the outstanding balance out of your own pocket. In very stark terms you are therefore potentially paying your own money out for an incident that was not your fault or beyond your control.
And what about for a car that was purchased and you own outright? Equally, if you have a new (ish) car, say less than 3 or 4 years old, then depreciation on that vehicle will also be significant. In this scenario you too would benefit greatly from Gap protection.
IN SHORT !!! If you purchase or lease a new or nearly-new vehicle (up to four years old), this is the period of time your car depreciates the fastest. During this time you should seriously consider Gap Insurance.
Related Reading: A Comprehensive Guide To Gap Insurance
Choosing The Right Gap Insurance For Your Car
Whichever method you choose to pay, there is a GAP insurance policy that is right for your vehicle, personal circumstances and financial position. GAP insurance is available for new and used cars.
If you paid cash for your vehicle, or paid a sizeable deposit, or if you financed it, Combined RTI Gap cover will pay out the shortfall between the cost of your vehicle and the market value at the point of claim, which is the amount your motor insurer will cover. This is cover that will protect you no matter if you use your vehicle for private use or for business.
If you leased your vehicle or it is under a contract hire agreement, Lease/Contract Hire Gap Insurance will cover you for the shortfall on your lease agreement, after your motor insurer settlement. If, for any reason, you change your vehicle within the first 90 days from the start date, we will also arrange to transfer your cover to your new vehicle without hassle or charge.
Can you pay Gap Insurance monthly?
If you’re looking for the convenience and affordability of a monthly payment option, Click4Gap offers you a non-financed agreement that enables you to pay a 20% deposit on purchase, followed by nine monthly instalments to cover the balance.
You won’t be signed up to a credit agreement, we’ll require no credit references or searches, and it isn’t subject to any changes in interest rates. For more on paying monthly for Gap Insurance click here.
Contact Click4Gap Today!
Looking to take out GAP insurance? We are here to help. Hop on our Live Chat, call us any time Monday to Friday, 9am to 5pm on 0208 819 3424, or Email us and we’ll get back to you during office hours.