Gap Insurance Quote Definition
Source(Google.com.pk)
What is GAP Insurance? Definition and Examplesby COLINK on NOVEMBER 29, 2011
I decided to research and write about this subject as a friend of mine has recently had an accident on his motorcycle; fortunately nothing major but not nice all the same.
I was surprised to hear a few days ago that he is now in a terrible position as his bike is being written off by Insurers and the suggested settlement figure he has been offered will not clear the outstanding finance he originally took out to purchase the bike.
This got me to thinking that this must happen quite a lot and is there insurance out there somewhere that will protect the shortfall. …It turns out this is called GAP Insurance!
So, let’s break it down like this…
What does GAP stand for?
When should I consider taking out GAP Insurance?
What types of GAP insurance are available?
What does GAP stand for?
GAP stands for Guaranteed Asset Protection.
When should I consider taking out GAP Insurance?
If you have purchased your vehicle using a personal loan, lease the vehicle or purchased it with cash you should seriously consider taking out some additional protection as you will almost certainly be in a negative equity situation until you have paid off a substantial amount of the agreement.
Vehicle values depreciate at an alarming rate, starting from the very moment you drive off of a forecourt.
A new vehicle is likely to be worth only around 40% of its original list price within 3 years of ownership.
Insurance companies are writing off more cars than ever due to the high cost of repairs and modern materials used.
When a write-off occurs you are responsible for any financial shortfall, not your motor insurer.
What types of GAP insurance are available?
There are two main types of protection available:
1. Lease or Finance GAP
In the event of your vehicle being declared a write-off by your motor insurers because of theft or an accident, there may be a shortfall between the vehicle’s current market value and the value required by the lease/finance company to settle the lease/finance agreement.
There could be a significant shortfall depending on the rate at which your vehicle has depreciated and the period that is remaining on the lease or finance agreement.
You will be held responsible for this shortfall by the companies involved.
GAP insurance would cover this shortfall for you as shown in the following example.
A vehicle is purchased for £18,335. 15 months later the vehicle is written off. The motor insurer settles £11,250 but the customer still owes the Lease or Finance company £13,175.
The GAP policy will pay the £1,925 shortfall direct to the Lease or Finance Company so that the agreement can be closed.
2. Protection if you purchase a new vehicle for cash
In the event of a write off Vehicle Replacement Insurance will cover the difference between your motor insurance payout and the cost of replacing your vehicle to the exact specification, even if the price of the new replacement car has increased. This is not available for used cars or any on contract hire or finance lease.
This type of GAP insurance is also known as Return to Invoice.
In this scenario if you purchased a vehicle for £15,000 and paid cash and the vehicle was later written off with a settlement figure of £12,750 from your motor insurers the policy would reimburse the shortfall amount of £2,250 to allow you to replace the vehicle with the same specification as the original.
I imagine our initial thoughts to all of this are that this will not happen to me, but you may want to consider the following alarming facts before dismissing this type of protection:
Over 200,000 cars are stolen every year and only 60% are recovered.
Around 500,000 vehicles are involved in serious accidents every year.
UK vehicle crime is now one third of all crime.
Your insurers will value your vehicle at the time of a claim, the offer they make will always be less than the price you paid.
Vehicles depreciate from the moment you purchase them.
A 3 year old vehicle may have lost as much as 60% of its value.
Do you have Gap Insurance? What are your impressions of this type of cover? Are you a GAP insurer? Let us know, we’d like to hear from you! Add a comment below!
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