Why is Gap Insurance for Cars necessary?
November 13, 2016
What is GAP cover for cars? Guaranteed Asset Protection Insurance fills in the gap between your vehicle’s value and your insurer’s payout should it be written off or stolen.
There are different GAP insurance types, including Finance Cover, Vehicle Replacement, Return to Invoice and Return to Value.
The importance of GAP cover for Cars
Almost all vehicles depreciate in worth, in some cases, quite quickly.
New cars lose about 40% of their purchase price inside of three years, based on logging 10,000 miles annually. A GBP 20,000 vehicles are worth only about GBP 8,000 following three years.
The value depreciation on your vehicle depends of course on the model and make. However, most cars lose significant amounts of their purchase prices over several years.
Gap cover for cars helps to plug the hole between your car’s purchase price and the payout received from your insurance provider.
This is its value should you need to buy the same model of car that you purchased several years previously.
Gap cover for cars Insurance types
Three main types of Gap Insurance are available, up to a value of GBP 50,000.
- Return to Value Protection
Return to value pays for the costs associated with the difference in the ‘complete loss payment’ from your insurance provider. This is related to your car’s value at the time of your GAP insurance purchase.
This gap insurance applies to vehicles that have 80, 000 recorded miles or less. Aged seven years old or less and not purchased at a dealer in the past three months.
This protection lasts for three years.
- Return to Invoice Protection
Return to invoice describes the difference between your car’s value when purchased and your car insurance provider’s ‘complete loss payment’.
To apply for this protection your vehicle must have 80, 000 recorded miles or less. Aged seven years old or less and purchased at a dealer in the past three months.
This protection lasts for between one to three years.
- Car Replacement Cover
This form of GAP insurance covers the purchase of a brand new, similar car ( the same specification, make and model) and the ‘full loss payment’ from your insurer.
Availability is contingent on your car being three months old or less, for periods spanning one through to three years.
- Finance cover
Finance protection pays out on the gap between any vehicle finance loan outstanding or balance amount and the ‘full loss payment’ from your insurer.
Gap cover for cars – Shopping Around
Protect your funds cost-effectively by purchasing GAP insurance. The Financial Conduct Authority enforced rules about protecting the car buying public therefore stopping the misleading practice of purchasing unnecessary insurance add-ons.
- Shop widely for cover: Customers are encouraged by the FCA to look at competing options as opposed to directly buying from a dealer.
- ‘Prescribed Information’ is required of car dealers to aid the public in making better and more informed decisions.
- Purchasing cover following a period of deferral: Don’t buy GAP insurance on the same day of a car’s sale because a four-day waiting period applies from the point of transaction.
The type of car purchase does not make a difference, be it through credit or cash, or purchased through a private sale or a dealership.
GAP insurance payment
An advantage of buying GAP insurance is paying for it using monthly premium instalments, therefore the cost is spread over 36 months, depending on the provider you choose.
At the conclusion of 36 months, you may take out the cover again, as long as your car does not go over the age limit of seven years. This application will require the legal car driver, who has to be 18 years or older in age.
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All info was correct at time of publishing