Featured within the Which? Report on Gap Insurance.
Protected by the Financial Services Compensation Scheme.
Why is Gap Insurance a good idea and do you need it?
Due to depreciation, your own motor insurance will only ever give you the value of your vehicle at that point, should it be declared a total loss. Gap Insurance has the ability to do one of three things, clear any outstanding finance, return you to the invoice price or top you back up to the replacement cost.
If you don't have Gap Insurance, you could be left paying off any outstanding finance and not have a vehicle or be left with a fraction of the purchase price you'd paid and again no vehicle.
You may have recently bought a car and been offered Gap Insurance, but is it a good idea and do you need to have it?
You don't legally need to have GAP protection in place as you do your motor insurance, however, depending on the circumstances in which you have purchased the vehicle, it can be a very good idea. If you have purchased the vehicle on a form of finance, in the event of a total loss (i.e the vehicle being stolen or written off in an accident etc.) your own motor insurance may pay a value that is short of clearing the finance. Therefore, you could be left paying for a car you no longer have. Gap Insurance can cover this difference and ensure that you walk away with no outstanding liability. For example, if your motor insurance only give you £5,000 and you owe £8,000 on the finance, that £3,000 shortfall is something you'd have to clear. However, with a form of Gap protection, that would be cleared for you.
Gap Insurance is also a good idea even if you have paid cash for the vehicle. As you have paid the full amount, all the money you have paid towards the vehicle is your equity. With the average vehicle losing as much as 50% over a three year term, you could lose as much as 50% of the equity you have in the vehicle in just three years. Therefore, if the vehicle was to be declared a total loss, you would only get half the price you paid for the vehicle. Gap Insurance can bridge the gap from what your motor insurance company pay for the vehicle back up to the original invoice price you've paid.
Is Gap Insurance a good idea, if you have purchased a used car?
You may believe that Gap Insurance is only for brand new vehicles, however, this is not the case. At Total Loss Gap, we have the ability to provide Gap Insurance for vehicles upto the age of 8 years old and 80,000 miles. The risks above still apply to you, even if you have purchased a used vehicle. You could still be left paying off the finance with no car or left with a fraction of the original purchase price.
Is it a good idea to get Gap Insurance from the dealership?
It really is up to you. However, you may be paying more than you have to for the same level of cover. It is widely known that dealerships overcharge for Gap Insurance as there have been a number of reports highlighting the difference in price. Indepedent suppliers will provide a higher volume of policies and will therefore be able to negotiate better rates and more comprehensive features. Martin Lewis Money Saving Expert and Which? Consumer Magazine have both highlighted the difference in price. If anything, you may have a lot more ability should you choose to buy independently.
Can you still buy Gap Insurance if you've had your car for over a year?
You can still purchase a form of GAP protection but you have to weigh up whether it is going to benefit you or not. The form of protection you will be eligible for is Agreed Value GAP. This form of insurance is designed to protect a set valuation of the vehicle taken at that point in time. This valuation is based on the current retail value according to Glass' Guide. If you still expect to keep the vehicle for a number of years or still have outstanding finance due on the vehicle over a number of years, then yes this form of protection should still be considered. That said, if you want to take the highest levels of Gap Insurance, you should purchase it within the first 180 days of ownership.
Is Gap Insurance worth the price you pay for it?
This very much depends on where you buy your policy from and how much you pay for it. With almost everything you buy in life, the more you pay for a product the better you expect it to be. However, this is not the case with GAP, instead it's more of an indication of where you purchase your policy. It is always worth shopping around to find the best price you can whilst comparing the policy features. A number of features come as standard with a lot of policies, double check the features against each supplier to weigh up the value for money you're getting with each policy. With any form of insurance purchased in the UK, it is important that you ensure that the policies are backed by the Financial Services Compensation Scheme in the UK. This means that should the underwriter or supplier come into any financial difficulty, your policy is still backed.
If you ever have to make a claim on the Gap Insurance, then yes of course it's worth it as you may have paid £150 and received a settlement figure of thousands.
Your policy is fully FCA regulated and backed by the Financial Services Compensation Scheme.
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