Why Buy Vehicle Replacement Gap Insurance?

Why Buy Vehicle Replacement Gap Insurance?

Vehicle Replacement Gap Insurance or Return to Invoice Gap Insurance?

Depending on the purchase method of the vehicle, you may have a number of different options available, when choosing a Gap Insurance policy. The two most common types that are likely to be available are Return to Invoice GAP and Vehicle Replacement GAP, but, which one is better?

First of all, let us explain how both policies perform should you need to make a claim. Return to Invoice Gap Insurance is designed to bridge the gap between your motor insurance settlement figure at the point of total loss and the original invoice price you paid for the vehicle. Due to depreciation, the settlement figure paid by your motor insurance company, in the event of a total loss, is likely to be a lot less than the original purchase price. Therefore, a Return to Invoice policy, in the event of a total loss, will bridge the gap between your motor insurance settlement and the original invoice price.

A Vehicle Replacement policy is slightly different, rather than returning you back to the original purchase price you have paid, instead will return you back to the replacement cost of the same 'like for like' vehicle, as this is likely to be more expensive. For example, if you purchased a brand new car, settlement would be based on the replacement cost of another brand new, same make, model and specification as you originally purchased, even if this is more expensive than the price you originally paid.

One policy will protect the purchase price of the vehicle and the other, the replacement cost, but which is better?

Due to inflation, changes in exchange rates, labour and importation costs etc, the price to buy that same vehicle again in the future, may be more expensive than the price you originally paid. Whilst we cannot guarantee that the replacement cost will be more, all the economic factors involved usually result in an increase in price. If you have already obtained a discount on the vehicle, that discount may no longer be available in the future and therefore, that could result in the replacement cost being higher. Again, whilst we cannot guarantee the replacement cost will be higher, because of the policy having the ability to take you up and above the purchase price, this policy has a greater ability in comparison to Return to Invoice.

That said, what if the model is on a special promotion at the point of total loss and the replacement cost is actually less than the original invoice price?

It can happen, although not likely, it may not be worth taking the risk. Most, but not all Vehicle Replacement Gap Insurance policies will have a Return to Invoice fallback built in, therefore if the replacement cost is less than the invoice price, you will be returned to the invoice price instead. When comparing policies and features, this is an important feature to give you that peace of mind.

At Total Loss Gap we offer a Combined Vehicle Replacement and Return to Invoice Gap Insurance policy that will pay the difference between your motor insurance settlement figure, in the event of a total loss and the HIGHER of either the original invoice price you paid or the replacement cost of another 'like for like' vehicle.