Proud to be Member of the BIBA - British Insurance Brokers Association.
Protected by the Financial Services Compensation Scheme.
Gap Insurance is a policy that runs alongside your own motor insurance fully comprehensive insurance and protects you in the event that your vehicle is written off.
Your own motor insurance will give you the market value of your vehicle on the day of loss with your gap insurance paying the difference between that figure and either the amount outstanding on finance or the invoice price, whichever is the higher.
This means that between your two insurance companies you have the purchase price back. If there is any finance on the vehicle, then this is cleared and whatever is left is yours to spend as you see fit. - Simple and Easy!
So whilst having your vehicle written off is not a forgone conclusion, it is something that happens to many thousands of members of the general public, day in and day out, the length and breath of the UK.
Please remember that if your vehicle is declared a total loss, then your own motor insurance company are only ever legally obliged to offer you the value of the vehicle on the day the incident happened. With some vehicles depreciating up to 50% and in some cases considerably more, during that time the amount that you are offered, could be a fraction of what you originally paid. We are not scare mongering, this is just a fact of motoring.
After all no-one would pay the same price for a brand-new car as they would for a vehicle that is 3 years old. So we already accept depreciation and in fact if you are buying a used vehicle we welcome it.
The problem arises if the vehicle is written off.
This is a real-life example taken from a member of our team. (thankfully they all as you would expect, have gap insurance)
In October 2017, a member of the team bought a Mini Clubman S 2.0 Diesel Auto with John Cooper Works steering wheel. - Stunning. A nice car and in fact this is the 3rd mini that this member of staff has purchased.
They paid £26,320 on the road after discounts.
Today the car is worth £11,360 - £13,350 (prices taken from Glass's Guide Jan 2020)
That means that if the car was written off today, even if they had paid cash (in addition to getting the 'maximum settlement' from their motor insurance company) they would still have only £13,350 in which to replace the vehicle.
They would have lost £12,970 and we think that that is a lot of money to lose. Or potentially worse if they had taken a form of finance, they could be left paying for something they no longer have or having to take on extra financial commitments to clear any outstanding amount.
Another colleague (after saving for over a period of 18 months) has finally bought his dream car, an Alfa Romeo Giulia Veloce 280. It is his pride and joy, bright red with black leather, beautiful and very responsive.
He bought the car for his 40th birthday in August 2019 and had managed to get a good deal.
The RRP was £38469 but he managed to get it for £32188.69.
The value today is between £25420 and £27650 in just 5 months. Best case senario thats a whopping £6768.69 loss.
Thankfully again he has gap insurance as if not without gap insurance potentially if his car was written off he could be left with a life changing debt.
Our team members own cars ranging from luxury Mercedes-Benz to Citroen C1's and in each and every occasion when we (who let’s be honest should be used to talking about deprecation remembering the job we do) spoke to the team member to ask about deprecation and what they thought their car was worth they were wildly and in some cases many of thousands of pounds out in estimations.
This is because it is human nature to not want to think about it. Everyone thinks that they got a good deal, you would not buy the car otherwise. Everyone likes to think that they are one step ahead. But deprecation happens and therefore gap insurance exists.