Advice and Tips // 25 April 2016
When you purchase a car it is a legal requirement to have car insurance in order to cover yourself and your car for theft and damage. However, basic car insurance is sometimes not the best route to take. Having your car stolen or written-off can be worrying enough, without having to go back and forth with your insurer over your claim. In some cases it might be a good idea to consider gap insurance.
Gap insurance, also known as guaranteed asset protection, is a type of car insurance designed to work alongside your normal comprehensive car insurance to help you cover any monetary loss if your car is written off or stolen.
If your car is written off or stolen, insurers usually pay out the current market value of a vehicle and not the price which you originally paid for it. In some cases you can find yourself losing money because of this, especially if your car was brand new.
There are a variety of different Gap insurances that range from products that help you get back what you paid for your car and some that help you pay off any outstanding finance on the vehicle.
As previously mentioned, there are many different types of Gap insurance and the market can be complex. Many providers offer their own unique product which can make it more confusing. We have listed the most common policies below.
Finance Gap insurance is one of the most basic Gap products you can get. This type of insurance helps you pay off any outstanding loans you may have on your car if it’s written off. This is perfect for anyone who has purchased a car on finance.
Return to invoice Gap insurance works together with your normal insurance claim to top up the claim amount to match the price you bought your vehicle for. If your car is brand new this is a good option to consider as your car can depreciate in value quite significantly in the first year.
Most insurers will offer finance Gap insurance as part of this product so that you can also cover the cost of borrowing.
Similar to return to invoice Gap insurance, Vehicle replacement Gap insurance joins the difference between your insurance payout and the cost of replacing your vehicle with a new one. Rather than providing the cost difference of what you paid for the car.
Lease Gap insurance is for those who have not purchased a car outright but have leased it. Lease Gap insurance assists you in paying the rest of your contract and any fees that may occur for cancelling the agreement early.
This is very similar to return to invoice Gap insurance, rather than helping you get the exact money back that you paid for the car it pays the difference between your car insurance settlement and the value when it was first purchased. This could prove useful if you bought the car second hand, or you have had your car for a long time.
Gap insurance is not essential as your car should already be insured and your insurance should pay for a new car of the same age and condition as yours was it when written off.
However, in some cases it may be worth considering looking for Gap insurance. If you would only like a brand new car or owe money to a car finance company it would be a good idea to look into getting Gap insurance on top of your normal insurance.