New Car example
Net Invoice Price£33,559
Market Value at the time of write off
e.g. 20 months old£20,135
Insurer pays£20,135
GAP Insurance Pays£13,424
Choosing a new car can be one of the most exciting things to buy. The variety of colours, trims levels and engines mean you can really make it your own. You can even give it a name. According to the DVLA, 28% of UK motorists have named their car.
But what if the worst should happen? If your 4 wheeled friend is stolen and not recovered, or even written-off?
Your fully comprehensive insurance policy will only pay you the market value of the car which is likely to be less than you paid for it. We conducted a study that showed new cars can lose 40% of their value after their first year.
There is a way to protect yourself financially by using GAP Insurance.
GAP stands for Guaranteed Asset Protection.
If you have bought a car, a GAP insurance policy can cover the loss in value if your vehicle is written off. GAP insurance helps to bridge the payment gap between the settlement amount from your comprehensive motor insurance policy and the original purchase price of your car. So, if your car is written off, or stolen and not recovered, the additional concern of finding the money to purchase a replacement car could be taken away.
How does GAP Insurance work?
According to Car Dealer Magazine the average price of a new car in UK showrooms in February 2018 reached £33,559.
If, for example, you purchased a car for £33,559 and it is written off after 20 months, your comprehensive motor insurance policy may only pay out the current market value which might be £20,135 (60% of its initial price). To replace your car with another model worth £33,559 you would need to find £13,424. GAP insurance is designed to bridge the difference.
3 Year Old Used Car example
Net Invoice Price when new£33,559
Net Invoice Price when 3 years old£16,780
Market Value at the time of write off
e.g. 54 months old£11,745.65
Insurer pays£11,745.65
GAP Insurance Pays£5.034.35
FAQs
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How long is a GAP policy?
GAP Insurance policies range between 2 and 5 years long.
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Is GAP Insurance suitable for you?
A fully comprehensive car insurance policy should allow you to replace your car with a similar one in age and condition of yours was written off. If this is all that you require from your car insurance, a GAP policy may not be right for you.
GAP insurance might be of use if you want to replace your car with another brand new car. It would also be useful if you bought your car on finance because your car insurance pay out will be lower than the amount you owe, so you will have to continue paying for a car that has been written-off.
If you bought a car of low value GAP Insurance might not be suitable, especially if the cost of car insurance and GAP insurance is more than the vehicle is worth. The value of GAP Insurance will depend on your personal circumstances. GAP Insurance may not be suitable for you if you buy a vehicle second-hand.
