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With so many GAP insurance providers online selling what apparently endless variations of GAP policies, it can be difficult to decide who to buy from, what the policies do and which policy is right for you.What is GAP Insurance protecting against?
You may or may not know that, if your car is written off or stolen, your insurance company will only settle at the market value of your car at the time of the write-off and not the amount you originally paid – even if you are fully comprehensively insured.
This could leave you significantly out of pocket but this can be prevented by purchasing a GAP insurance policy.Which policy should I buy?
This can depend on a few things.
Firstly, are you buying the car either outright, on a personal loan or on finance? If so you would be able to purchase a Back to Invoice policy or a Vehicle Replacement policy.
A Back to Invoice+ Plus policy will pay the difference between your comprehensive insurer's settlement in the event of a write-off and either the original invoice price or the outstanding finance- whichever is the greater amount.
A Vehicle Replacement+ Plus will pay up to the replacement cost of a vehicle of the same Make, Model, Specification and Age as the car originally purchased- even if that cost is higher than the price you originally paid.
Alternatively if you have obtained the car through a contract hire or lease there is a liability to the finance company for the rentals due to the finance company.
A Contract Hire+ Plus will cover up to 100% of the outstanding rentals to the finance company, as well as any difference in the residual value of the car.What should I look for when buying a policy?
There are certain features to be aware of when buying a GAP policy to ensure that the cover you receive the best level of cover
1. Market Value Clause
Be careful when buying policy that it does not contain one of these clauses.If you purchase a GAP policy with one of these clauses and your Comprehensive insurer pays less than the Glass's Guide Retail Value in the event of a total loss, you could be left with a shortfall. Your GAP insurer will only pay from the market value not the payment you actually received from your motor insurer where one of these clauses appears.
2. Free Transfer
Most GAP policies expire when the applicable vehicle is sold. If you change your vehicle at any point a good GAP policy will let you transfer any unused premium free of charge and deduct this from the price of a policy on your new vehicle.
3. Maximum Value Clause
This is another clause to avoid. This places a cap of between 100% and 110% of the Glass's Guide Retail Value which may mean that the added extras you've paid for won't be covered by your GAP policy.
4. Time Limit for making a Claim
A good GAP policy will give you plenty of time to make a claim, accounting for the possibility that there can be delays when your car has been written off. A policy which gives you 120 days to claim rather than just a standard 30 gives you a bit more breathing space.
5. UK Underwriters
Underwriters, like all businesses, can fail. GAP providers' operating outside of the UK can have different obligations if this happens and you have to look into these obligations before you purchase. If you buy a GAP policy underwritten by a FSA authorised and regulated UK insurer and they cease trading then your GAP policy is protected under the Financial Services Compensation Scheme – less hassle, no worry!
6. Deferred Policies
A number of motor insurers offer new-for-old replacement on brand new vehicles in the first year, encouraging some customers to defer the start of their policy. However, during that first year the insurance company can revert back to paying only the market value for various reasons; mileage or condition of the vehicle and in some instances if the vehicle is stolen.
It is a good idea to have a GAP policy running alongside this new-for-old period, as if they do settle at market value then the policy will step in and cover the shortfall. Also, a good company will start you a new policy free of charge if your comprehensive insurer replaces your vehicle in the first year.
