A Guide to Buying GAP Car Insurance
Mind the Gap! When its pays to take out Guaranteed Asset Protection or GAP Car Insurance.
If you’re about to buy a car, new or second hand and particularly if its on finance, you may well have come across Guaranteed Asset Protection Insurance and wondered whether you need it. GAP Car Insurance, as it is commonly called, is an insurance cover designed, principally, to protect you from depreciation in your vehicle after purchase. It’s worth researching thoroughly and certainly worth getting a range of quotes from independent insurance brokers as prices can be significantly cheaper than buying through the dealer at the point of purchase.
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Gap Car Insurance sometimes gets a bad wrap. Characterized as an unnecessary add-on pushed onto car buyers a couple of days after the point of purchase, people are typically skeptical.
While there are many circumstances where Gap car cover may well be above and beyond scope, there are also plenty of situations where it could really pay off. In this article, we’ll try to offer you some insights about when cover may be appropriate.
Back to basics – what is Guaranteed Asset Protection or GAP Car Insurance?
Gap Car Insurance is covers the difference between the price you paid for your car and its value at the point when you make a claim. That can be quite a significant difference, particularly if you are buying a brand new car. In fact, its estimated that on average, a new cars’ value depreciates by 40% in the first year and 60% within three years.
If the car is written off – in an accident for example – the insurance company will usually pay out its value at that time – which as highlighted, may well be a lot less than you paid. This is where Gap Car Insurance does exactly as its name suggests – plugs the gap, effectively ‘topping up’ your standard insurance payout.
When is GAP Car Insurance worth buying?
GAP car insurance is worth buying in a number of circumstances, and there are four principle types of GAP Car cover to address those:
If you have taken out personal finance – a loan, for example – to buy the car. You could find yourself in a situation where your 15 month old, £30,000 car is stolen or written off. While your insurance will pay you its value at that time – probably somewhere around £18,000, you will still be paying off the loan for the original full amount.
Return to invoice Gap Car cover
If you really want to ensure that you get a replacement that matches the value of the vehicle when you bought it. Under a fully comprehensive insurance policy, a car written off or stolen will be replaced with a brand new one as standard. After that first 12 months, though, the payout would only cover the cost of a similar vehicle of approximately the same age and specification. Return to invoice GAP car cover will pay out the difference between your insurers ‘total loss payment’ and the value of your car when you bought it.
Return to value cover
This pays out the difference between your insurers ‘total loss cover’ and the value of your vehicle when you took out the GAP car insurance cover itself. This can be useful where you’ve already bought the vehicle.
Vehicle replacement cover
If your car is less than 3 months old, you might want to consider vehicle replacement cover. This cover pays the difference between the insurers ‘total loss payment’ and the cost of replacing it with a brand new equivalent (same make, model and specification).
Whatever you requirements might be, it’s worth shopping around. Costs for GAP car insurance cover can vary massively. As an independent insurance broker, we have access to a number of policies with a range of GAP insurance providers. This means we can compare what’s available and get the cover that best meets your needs.
Insurance Brokers on 01246 575 625 and a member of our team will be able to answer any questions you may have and advise you on the appropriate Insurance for you.