We are helping you make sense of the most popular types of GAP insurance and how to choose the right level of cover for you.
What Is GAP Insurance?
Before going into the different types of GAP insurance, it’s important that you understand what it is in the first place.
In short, GAP (Guaranteed Asset Protection) insurance is a type of asset protection for your car that will help you protect your hard-earned money from total loss claims.
There are several specific types of GAP insurance but the overall goal behind this kind of coverage would be to make sure you don’t go empty-handed or worse, owe money, after a complete write-off or theft.
GAP insurance bridges the “gap” between market value and the cost of the vehicle.
Average Car Depreciation
Depreciation is inevitable when you buy any vehicle, but it’s important to know that this process doesn’t have to take away your joy. There are many factors involved in how much a car will depreciate over time regardless of whether they’re new or old!
You can use this quick equation as a rule of thumb:
- Year 1: 15-35% depreciation. 65-85% of the original value.
- Year 3: 40-60% depreciation. 40-65% of the original value.
- Year 5: 60-70% depreciation. 30-40% of the original value.
- Year 8-10: 80% depreciation. 20% of the original value.
Let’s put this into an example. You decided to buy a brand new MINI Hatch 1.5 Cooper Classic; the typical RRP is £17,405 for a brand new car. You are looking to lose somewhere between £2,600 and £6,000 in year 1; £7,000 – £10,400 in year 2; up to £12,200 in year 5 and so forth. So, whether you’re buying a new or used car, you might want to consider purchasing GAP insurance for complete peace of mind.
Why Do I Need GAP Insurance?
No one wants to think might be in the position where their car is stolen or considered to be a write-off. Therefore, GAP insurance provides a guarantee that you won’t be left out of pocket if the worst was to happen.
Guaranteed Asset Protection is worth the money and considering the low cost of the cover, it’s certainly a worthwhile investment.
What Are The Different Types of GAP Insurance?
There are several types of GAP insurance on the market. At Dynamo, we specialise in options that provide the right level of coverage for both cash and finance purchases.
Outstanding Finance GAP Insurance
An Outstanding Finance GAP policy is often attached to other forms of coverage as part of a package. It’s designed to fulfil any outstanding finance repayments of a vehicle that’s been written off.
Therefore, it’ll pay the difference between the insurer’s pay out and the early settlement offer from your finance company (including any interest and early repayment fees).
For example, if the insurer pays £25,000 following a claim, but your finance company is due £28,000 (£25,000 for the car and £3,000 in fees and interest), the outstanding finance GAP pays the £3,000 difference.
Return to Invoice GAP Insurance (RTI)
This policy will bridge the gap between your car insurance pay out which will fluctuate depending on the current value of the car at the time of the claim and the amount you bought the vehicle for, which may prevent you from being left severely out of pocket. This can often be purchased along with an Outstanding Finance GAP Insurance policy.
An example pay out includes an insurer paying £25,000 towards a £30,000 car and the RTI GAP insurance paying the £5,000 difference (plus any fees and interest the finance company would be owed on top).
Vehicle Replacement GAP Insurance (VRI)
Vehicle Replacement GAP or VRI is a type of insurance that tends to cover the cost of what you paid for your vehicle, the cost of a like-for-like replacement, or cover the amount of finance you owe on your Finance Agreement.
As an example, if the insurer pays £25,000 following a claim and the cost of a like-for-like car is £28,000, the VRI GAP policy will pay the £3,000 difference.
Where can I buy GAP insurance?
GAP insurance can be purchased online, over the phone and in person. Banks, Insurance Companies, Specialised Brokers and Authorised Dealerships. We recommend doing some research before committing to any of these options. Make sure you have the right level of cover and pay the right premium.
Why choose Dynamo Cover for GAP insurance?
We are proud to say that our GAP insurance is rated 4* by Defaqto. Users rate us as ‘Excellent’ 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!
