Question & Session on Gap Insurance?
What is Gap Insurance? Often referred to as Shortfall Insurance.
Gap Insurance is an acronym for Guaranteed Asset Protection Insurance. It’s all in the name as it provides guaranteed protection for your asset. In this case, your asset is your vehicle. Gap Insurance protects the original invoice price you paid for your vehicle. It in theory, ring fences this invoice price and writes it in the sand.
Given that your comprehensive insurer will only pay you the market value of your vehicle (car, motorbike, van or motor home) the day it is written off or stolen, you are guaranteed to be left with a financial loss. Shortfall Insurance will supplement your comprehensive insurance and protect you against this financial loss, by paying you the outstanding GAP which would have occurred.
Why is Gap Insurance important?
Two basic facts: 600,000 vehicles are written off each year in the United Kingdom and the average vehicle deprecates by up to 50% in the first three years.
Who is Gap Insurance for?
All drivers of any age (17 onwards obviously), any sex, any location, any vehicle, etc. This is because no matter your age, sex, location or what vehicle you have, no one is immune from having their vehicle written off. Not even your favourite superhero!
What are the different levels of cover?
The three most popular Shortfall Insurance policy types are: Return to Invoice, Vehicle Replacement and Contract & Finance Gap.
Return to Invoice is designed to return you, the driver to the original invoice price you paid for your vehicle.
Vehicle Replacement is designed to protect you against any additional increase in the original invoice price you paid for your vehicle. The invoice price may increase for a range of reasons, most notably if the manufacturer introduces an upgraded version of your model or say, if the government increase VAT.
Contract & Finance Gap is designed to protect you against the financial agreement you have taken out in order to purchase your vehicle. Examples of finance agreements are: Contract Hire or Finance/Lease Hire.
Where should I purchase Gap Insurance?
By searching online, you can find prices for as low as £39.99 inclusive of insurance premium tax. Before you purchase your policy type, ensure that the company involved is protected by the government ran, Financial Compensation Scheme, which means if in the case the company folds (just for example), you will remain fully protected by Shortfall Insurance.
But I was quoted £395 by the dealership?
The average Gap Insurance price at the dealership is £395. In fact, we have even dealt with customers who have been quoted as much as £1000. By shopping online, you can find policies for as low as 85% of the average dealership price. This is down to a range of reasons. Firstly, the different rate of Insurance Premium Tax (IPT) online providers and dealerships both pay. Online providers are expected to pay 6% IPT, while dealerships pay 20%.
Secondly, dealerships can only sell Gap Insurance to vehicles that they have directly sold. Online providers can sell Shortfall Insurance to anyone. Thirdly, the basic running costs of the two businesses. Online providers to no surprise have little costs, for example, building maintenance and staff, while dealerships have considerable large running costs.