What is Gap Insurance?

Guaranteed Asset Protection, or Gap Insurance as it is more commonly known, is a form of cover that protects you against financial loss. As we all know, owning a vehicle is common in the UK, indeed there are over 30 million vehicles on the UK roads today. One common factor they share is that they will all lose value over a period of time.

Some far quicker than others!

Have you ever thought what would happen if you have a vehicle written off in an accident, or it is stolen?

If you have 'fully comprehensive' vehicle insurance then you are covered? Well, yes and no really. You see 'fully comprehensive' vehicle insurance may only cover the value of the vehicle at the time it is written off. This 'market value' is likley to be far less than you originally paid for it, and you may only find out how much value your vehicle has lost when your insurance company write it off. 

You may be left having to find thousands of pounds to find a decent replacement, or even just to clear any finance still owed on the vehicle. Not a great situation to be in

So how can Gap Insurance help?

Gap Insurance is designed to help you bridge the financial gap created by vehicle depreciation. This can be done in differnent ways, and indeed there are several forms of Gap Insurance available in the UK to help with this. 

Finance Gap Insurance- will cover the difference between the 'market value' of the vehicle, and the amount you still have outstanding on the finance agreement. 

Return to Invoice or RTI Gap Insurance- will cover the difference between the vehicle 'market value' and the original invoice price you paid. 

Vehicle Replacement Insurance or VRI Gap Insurance - will cover the difference between your vehicle 'market value' and the cost of replacing the vehicle on a 'like for like' basis, similar to 'new for old' on your home insurance. 

Do you need Gap Insurance?

This is a question often asked, and it is worth considering all the facts. Around 600,000 vehicles are written off on the UK roads each year. Will you be one of them? Of course nobody can tell, and its not as if you plan to have an accident or get your car stolen is it? 

Also, the average new vehicle will lose up to 60% of its value in the first 3 years of its existance. Some vehicles are even higher. 

Combine these two facts, and you can see that even though the chances of having a vehicle written off are not great, if it does happen to you then you can be left in a difficult financial position. Food for thought. 

We will talk about the different aspects of Gap Insurance in later posts, but thanks for reading and we hope you are a little more enlightened!

How Gap Insurance can help protect your investment