Which Gap Insurance is best to help you?

Why do you need Gap Insurance?

We must first emphasise that it is not a legal requirement to purchase Gap Insurance in the same way that it is for Motor Insurance. However, by not protecting yourself with a form of Gap Insurance, you do leave yourself open to the financial effects of depreciation. Depreciation is the speed at which your vehicle will lose value over the course of ownership.

All vehicles will experience a rate of depreciation and in fact, a recent industry report has highlighted that the average vehicle will lose as much as half of the original vehicle value within just three years. If you would like to check your specific rates of depreciation why not click on over to WhatCar and calculate the depreciation rates on your vehicle.

However, whilst your vehicle may depreciate you are wondering when in fact this depreciation may have an effect on your finances?

Well, if your vehicle was ever to be declared a total loss, your motor insurer is only legally obliged to pay you the market value of your vehicle on that day. This could leave you with a significant financial gap. For example, you purchase a vehicle for £20,000 and just three years down the line the vehicle is written off and you receive a settlement of £10,000. In just three years time you have lost £10,000 and this is how Gap Insurance can help you.

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How can Gap Insurance help you?

There are a number of different forms of Gap protection for you to consider, all of which have different capabilities. A number of main dealerships within the UK may have called your Gap Insurance policy something different such as Guaranteed Asset Protection, Total Loss Protection or Auto Gap amongst others.

If you have recently stepped out of the dealership, it is more than likely that you will have been offered a form of protection. This form of protection is likely to be Return to Invoice. This form of Gap Insurance would protect the financial difference between the market value of your vehicle on the day it was written off or stolen and the original invoice you paid. In the example above, you would be returned from the £10,000 back up to the £20,000 giving you the ability to clear any outstanding finance and the bit in the middle, the balance, deposit and equity is yours.

Which Gap Insurance is best for you?

As well as this form of protection, there are two other forms for you to consider. If your vehicle was declared a total loss and you had purchased your vehicle through the form of a finance agreement, your motor insurer would give you a settlement figure and your finance company would also give you a settlement figure. If your motor insurance settlement figure is lower than your finance company's, then you will have a shortfall.

You would be left paying for a vehicle you no longer own. However, this is how Finance and Contract Hire Gap Insurance can help. Finance and Contract Hire GAP would simply pay the difference between your motor insurance settlement and the amount you have outstanding on your finance agreement. This will give you the ability to walk away from the vehicle without any financial liability.

Vehicle Replacement Insurance is the last form of Gap protection for you to consider. If you are aware of the abilities of 'new for old' insurance then this is the closest form of Gap Insurance. Vehicle Replacement Insurance will pay you the difference between your motor insurance settlement and the amount it would cost to replace the vehicle with the same make, model, age and mileage etc as yours was on the day of purchase.

If you have any further questions on Gap Insurance and how it could help you, why not give one of our friendly customer service team a call on 0800 195 4926.
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