It's a sad fact of life that the value of a brand-new car reduces by a third the moment you drive off with it after purchase. It lowers by 40% in the first year, and up to 60% over three years on average!
GAP insurance UK isn't necessary because your car insurance should cover the cost of a replacement vehicle. If the vehicle is less than a year old, it will be a brand-new vehicle. It can be purchased with new or old cars.
NEW CARS, ON THE OTHER HAND ARE MUCH MORE USEFUL. This is because new cars depreciate at a significantly higher pace than used cars. The value of a used car is already reduced and the depreciation process has slowed. The gap it covers between the amount you bought and what your insurer will pay out is much smaller. Therefore, GAP insurance cover for old cars is typically useless.
We can assist you with GAP insurance comparison and assure that your insurance will be very affordable. Choose your type of cover and obtain a GAP insurance quote right away!
Guaranteed Asset Protection (GAP) insurance protects you from financial loss if your car insurance provider declares your vehicle a total loss or write-off. If you have an accident in your car and it is written off, your comprehensive car insurance will compensate you financially for the loss of your vehicle. Unfortunately, your car insurance only covers the market value of the vehicle, which is likely to be less than the purchase price. It's a stand-alone policy that covers the difference between the car's purchase price and its current market value.
So, if you paid £20,000 for a car on finance and it depreciated 60% in three years, the car would be worth £8,000. Your insurer would pay the market value of £8,000 (minus any excess) if the car was written off, so you'd be out £12,000. GAP insurance would cover the £12,000, allowing you to resume driving a brand-new vehicle.
You may be paying more than you need to for GAP insurance cost, if you get it through the car dealer, with rates ranging from £300 to £1,000.
A three-year policy purchased independently from the dealership might cost between £150 and £300, but the more valuable the car, the more expensive the insurance.
GAP insurance coverage is frequently purchased in advance. When you've just purchased for a new car, the last thing you want to do is pay for extra cover, think about how you'd feel if you couldn't get your money back. If you do decide to buy, shop around compare GAP insurance because not all insurers offer the same degree of cover.
The good news is that vehicle dealerships aren't allowed to sell you GAP insurance at the same time as you buy a car from them, according to the Financial Conduct Authority (FCA). They must have a two-day ‘pause in sale’ so that the customer can shop around.
This means that the dealership will begin the sales process the day you pick up the car. Then they'll ask you to return a few days later to finalise any paperwork or the credit agreement. It’s more than likely that's when you'll be asked whether you want a GAP cover, so take the opportunity to figure out how much you should be paying and compare policies.
Don't just go with your dealer's insurance; you might be able to get a better bargain from an online provider by completing a GAP insurance quote comparison.
You can normally pay your premiums in monthly instalments, spreading the cost over up to 36 months, as with other types of GAP insurance. However, this varies based on the individual provider.
If your car does not exceed the seven-year age restriction, you can renew your cover at the end of the 36-month period. You will need to submit a new application at this time, and the car will need to be revalued. Once cover is in place, you will have peace of mind knowing that you are financially insured if your car is stolen or written off.
There are significant differences between policies, as there are with other types of insurance. When getting GAP insurance UK, two important aspects to consider are whether you purchased the car from a dealer or privately, and how you paid for it. It's critical that you enter this information correctly in order to obtain an insurance that meets your needs.
If you bought your car on finance, certain policies will cover the outstanding balance of the loan, even if it is greater than the difference between the invoice price and the market value. If you have comprehensive car insurance, study the fine print. Some insurers will replace your car if it is less than a year old, so you may not need additional cover.
Return to invoice cover (RTI)
An RTI cover will reimburse the difference between the original purchase price and the settlement received from your insurer if your car is written off or a complete loss. It's possible that it'll even cover any outstanding finance. RTI applies to vehicles purchased within the last six months from a dealer.
Agreed Value Cover (AVC)
After the RTI cut-off point, most insurers offer AVC for cars purchased privately or via a dealer. It pays the difference between the car's worth when you started the policy and the insurance valuation at the time it was written off.
Contract Hire GAP (CHG)
If you are looking for a new vehicle this one is for you. This sort of insurance is for leased cars that you don't own. Most insurers will cover any outstanding rental payments or termination fees, as well as any gap in your insurer's market value pay-out.
Other GAP policies include:
Vehicle replacement (VR) - in the event of a total loss, VR pays up the difference between the cost of replacing your vehicle with one that is almost the same in specification to yours on the day you first took delivery and the market value paid out by your main insurer. This sort of insurance is meant to safeguard you if the cost of a replacement car increases.
Finance gap - this pays out the difference between the amount of outstanding financing and the market value of the car paid out by your main insurer in the event of a total loss where you purchased a car on finance or PHP. No payment is made if the market value is more than the amount of outstanding finance.
When your car is written off, your car insurance policy should allow you to replace it with one of similar age and condition. A GAP policy may not be ideal for you if this is all you need from your car insurance. If you wish to replace your car with a brand new one, you may need GAP insurance. It's also useful if you took out a loan to buy your new car. Your pay out won't be enough to pay off the debt, leaving you with a written-off vehicle to pay for.
Should your car be written off, GAP insurance gives you some extra financial security. Make sure you can afford the premium on top of your existing car insurance and any possible monthly loan or lease expenses before purchasing a policy.
Keep an eye out for the following typical exclusions: