5 top questions about GAP Insurance

Today we are answering the top 5 questions about GAP Insurance.

RTI GAP dynamo cover

1. What is GAP Insurance?

We are often asked, “What is GAP insurance?” So… we thought that would be an excellent place to start.
Although there are a number of types of GAP coverage (known as Guaranteed Asset Protection if you were wondering), their fundamentals are the same.
Your vehicle is a depreciating asset, meaning it will lose money over time. In general, the longer you keep it, the more its value will decline.
If this vehicle is damaged in an accident, stolen, flooded, etc, then you are in the hands of your insurer. Your motor insurer may decide to either fix or replace this vehicle. So, you have not suffered financial losses, so you cannot file a GAP claim.
The motor insurer may, however, determine that repairing the vehicle is not economically feasible. At that point, the vehicle could be declared to be a total loss. If that happens, your insurer may only pay you what the vehicle is worth at that point in time.
A vehicle’s ‘market value’ is what it would cost to replace the vehicle when you claim it.
You will likely receive less in the form of a ‘market value’ settlement than you paid for the vehicle originally. Furthermore, you may end up owing more if you had a finance agreement. This can cause financial loss.
Gap insurance can protect you against financial losses. Your choice of GAP Insurance depends on the item you are seeking to protect.

2. What types of GAP Insurance are there?

  •  Outstanding Finance
Pays the difference between the Insurer Payout and the Early Settlement Offer from your Finance Company, including any Interest and Early repayment fees due. E.g. Insurer pays £25,000 following a claim, however, your finance company is due £28,000 (£25,000 for the car and £3,000 in Fees and Interest). Outstanding Finance GAP pays the £3,000 difference.
  • Return to Invoice
Pays the difference between the motor insurers’ settlement and the invoice price of the vehicle plus any outstanding Finance charges or Interest – E.g. Insurer pays £25,000 towards a £30,000 car, GAP insurance pays £5,000 difference, plus any fees and interest the finance company would be owed on top.
  • Vehicle Replacement Insurance
Pays the difference between the Insurer Payout and the cost of replacing the vehicle on a like-for-like basis. E.g. Insurer pays £25,000 following a claim, however, the cost of a like-for-like car is £28,000. Vehicle Replacement GAP pays the £3,000 difference.

3. What price to put for the vehicle price to get a correct quote?

The type of GAP insurance you choose can affect this. You should use an amount that is as close to the net invoice price that you originally paid for the vehicle.
This figure should be shown on your vehicle’s invoice and should include any factory extras, cash deposit, or part exchange allowance. If a discount has been applied to the list price, or if any interest has been added to the loan, the figure should not be the list price of the vehicle.
You may not have a purchase invoice for the vehicle under Contract Hire agreements. If so, the P11D value would be the perfect value to use, if not the list price for the vehicle from the manufacturer (these prices ought to be very similar, if not identical).
You can search for the agreed value directly on Glass.co.uk.

4. What happens if the vehicle is sold before the cover ends?

Some GAP products will allow you to cancel the policy, and apply for a ‘pro-rata’ refund for the time left on the policy. This is a common practice for online retailers and dealerships.
You may find that one of the biggest differences between taking GAP out with a motor dealer and buying it from an independent retailer, is that you won’t have the option to transfer your policy to another vehicle mid-term. This makes buying GAP insurance from Dynamo Cover a more convenient option.

5. Under what circumstances does GAP insurance not pay out?

One of the main questions about GAP Insurance! All insurance policies come with terms and conditions. Sometimes, you will not be eligible to file a claim.
Here are some examples of when GAP Insurance may not pay:
  • if your main motor insurer does not pay out. There may have been negligence, alcohol consumption, or general violations of the law on the part of the driver
  • in the event that the vehicle did not belong to you. To be eligible for a GAP Insurance policy, you must have an “insurable risk” on your vehicle. That means you will suffer financial losses if the vehicle is written off. This can happen if you own the vehicle outright, have a finance agreement on it, or have a lease agreement. If none of these applies, you have no claim (for example, your name is not on the sales invoice for the vehicle).

We hope that this article has helped you with your questions about GAP Insurance.

We are proud to say that our GAP insurance is rated 4* by Defaqto. Users rate us as ‘Great’ by TrustPilot for both product and service. We cover cars up to £80,000 and provide additional benefits, like Personal Injury and Excess cover. Get a quick quote online today. We won’t be beaten on price!

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