This article has been written to assist your understanding of Gap Insurance and to help you recognise its full importance to not just your vehicle, but most importantly, to your finances.
Before you read the following article, please note:
- 600,000 vehicles are written off in the UK each year
- 100,000 vehicles are stolen in the UK each year
The majority of drivers in the UK assume that they are fully protected by their basic comprehensive insurance. This is incorrect.
If in the unfortunate case your vehicle is written off or stolen, you will receive a settlement payment from your basic comprehensive insurer. This payment will be based on the market value of your vehicle at the time it was written off or stolen. Please note that this value will not represent what you originally paid for your vehicle.
Why? This is because of vehicle depreciation. Industry experts claim that the average vehicle will deprecate by up to 50% in its first three years. In order words, in the first three years, your vehicle will lose 50% of its value.
Please consider the following example. Mark purchases a Vauxhall Corsa for £10,000. Three years later it is stolen. Mark's comprehensive insurer pays him £5,000 because this was the market value of his Vauxhall Corsa at the time it was stolen. This means that it has depreciated by 50%. This means that Mark has lost £5,000. This means that Mark now has a GAP/Shortfall of £5,000.
This demonstrates that the basic comprehensive insurance does not provide full protection. This is why Gap Insurance is made available.
Gap Insurance will pay the difference between the market valuation of your vehicle and the invoice price originally paid for your vehicle. It will work alongside your comprehensive insurance and act as a supplement. GAP is an acronym for guaranteed asset protection. It will provide guaranteed protection for your asset. The asset being your vehicle.
Without Gap Insurance, you could be left with a significant financial GAP or Shortfall.
There are several Gap Insurance policy types: Return to Invoice, Vehicle Replacement, Contract Hire/Finance Gap and Agreed Value. Each policy is designed to suit driver's individual's needs and wants.
If you shop online, you find Gap Insurance for as low as £39.99 inclusive of insurance premium tax. The average dealership will charge an average price of £395 for Gap Insurance.
