Featured within the Which? Report on Gap Insurance.
Protected by the Financial Services Compensation Scheme.
The problem - these car owners may intend on owning the vehicle for 2,3,4 or 5 years. If they want GAP cover for this period then they will find that a policy must be purchased within a set timeframe of buying the vehicle. This is often between 90-180 days.
The conundrum - if you have 'new for old' replacement cover with your motor insurer for a year then you may not need GAP Insurance for that period. But, if you leave it a year to buy GAP Insurance for further years you may find you have left it too late to buy GAP cover.
The answer - Total Loss Gap 365
Many online resources tell readers that they may not want GAP Insurance if their motor insurer provides new car replacement as well.
This can happen when:
you are the first registered keeper for the vehicle (eg, not a pre-reg or on a contract hire agreement)
the vehicle is written off in the first year of your ownership.
Yet, and with respect to these experts, they all miss the fact that car owners are likely to own the vehicle for far longer than one year.
So if something happened after the end of this 'new for old' cover, then without GAP Insurance you could face a significant loss on the vehicle. If you have a finance agreement you could also face a shortfall to pay.
One way to get around this issue is to buy a GAP Insurance policy and deferring the start date of cover.
This means you could buy the policy when you buy the vehicle but simply set the start date to begin a maximum of 365 days from the date of first registration of the vehicle.
This means you can be covered by your motor insurance 'new car replacement' cover in year one. You can then select a number of years of GAP cover to follow.
Few GAP Insurance providers offer it. A few years ago the option to defer a GAP policy was quite easy to find, particularly in the open market. Today, only a small number of providers offer this. The good news is, Total Loss Gap is one of them.
The terms and conditions offered by your motor insurer for new car replacement may not be met. There can be some criteria that you would have to meet in order for your motor insurer to provide a new replacement vehicle, of they write off your car in year one. These can include exclusions if the vehicle is stolen, a fault accident, or where a replacement vehicle is not readily available.
Premiums for deferred policies can be higher when compared to premiums for cover from 'day one'. If you take a Total Loss Gap standard policy for 3 years, starting right away, this will be cheaper than taking a Total Loss Gap 365 policy for 3 years, deferred for one year. This is because the deferred policy, even though it is for 3 years, is effectively covering 4 years' worth of depreciation.
You must normally be the first registered keeper for the vehicle AND you must have a new car replacement cover with your motor insurer in year one. This normally excluded leased vehicles (perhaps some vehicles on HP also, you would need to check with your motor insurer and finance company). It would normally exclude pre-registered vehicles also, as you are not the first registered keeper.
You may switch motor insurers at renewal, and the new insurer does not cover you for a replacement vehicle, only 'market value'.
Our version of a deferred GAP Insurance policy is our Total Loss Gap 365 policy. The policy allows the same cover as our premium Combined Invoice and Replacement GAP.
This is available to vehicle owners where:
they are the first registered owner for the vehicle
they can prove (at time of claim) that they had new vehicle replacement cover with the motor insurer in year one
There are two options available in taking out cover.
You can set up cover between 180 days and 365 days of the vehicle's first date of registration. You can set the start date no more than 365 days of the date of first registration.
You can set up the Total Loss Gap 365 within 180 days of buying the vehicle, and setting the start date no more than 365 days after the date of first registration.
The advantage of taking option 1 over option 2 is that you secure your premium and policy terms for a policy starting in the future. The policy terms nor the premium can change even if they do alter at the time your deferred start date starts.
You buy a brand new vehicle on 1st September 2020 for £25,000. You have new car replacement cover for the first year with your motor insurer.
You select a Total Loss Gap 365 policy, selecting 3 years of cover with a start date deferred until 1st September 2021. This gives you a further three years of cover once your replacement cover with your motor insurer ends.
Your vehicle is written off in December 2023. The motor insurer pays the market value to you at £12,000
The Total Loss Gap 365 covers between the motor insurers settlement and the higher of either the original price you paid OR the costs of the equivalent new vehicle at the time of claim.
If we said the cost of the equivalent new vehicle was £27,000 in December 2023 then this is higher than the £25,000 you originally paid.
In this example, the Total Loss Gap 365 would cover between the £12,000 your motor insurers pay and the £27,000 cost of the new car in 2023.
So if you have a new car, replacement cover in year one with your motor insurer AND you are looking for further GAP cover for more years then Total Loss Gap 365 may be a great option for you.
Your policy is fully FCA regulated and backed by the Financial Services Compensation Scheme.
We are here to help! Search our help centre for any questions you may have.