In the seemingly complex landscape of insurance policies, GAP Insurance stands out as a critical layer of protection for new and used vehicle owners. We often get asked a recurring query at TBR. That is, is GAP Insurance worth it? This article looks to unpack the basics of GAP Insurance. We will assess its advantages, limitations, and overall merit as a financial safety net for vehicle owners.
An Introduction
To navigate the complexities of GAP Insurance, it is essential to first understand its core principle – Guaranteed Asset Protection. This form of insurance addresses the ‘GAP’ between the purchase price of your vehicle and its value at the time of loss. This loss could be either through theft or a total write-off. GAP Insurance guarantees that if your vehicle becomes a total loss, it won’t burden you with a loan for a vehicle you no longer own or pay you less than your original outlay.
What are the Different Types of GAP Insurance
There are several different types of GAP Insurance. Each type offers a solution designed to cater to the diverse needs of vehicle owners and is customised for particular circumstances and types of vehicle ownership. Here are the primary types of GAP Insurance available:
1. Return to Invoice (RTI) GAP Insurance
RTI GAP Insurance bridges the gap between the insurance payout you receive when your car is written off and the original invoice price you paid for the car. This is particularly suitable for individuals who have purchased their vehicle outright or have a finance agreement not linked to the vehicle’s value.
2. Vehicle Replacement Insurance (VRI) GAP Insurance
VRI GAP Insurance covers the difference between the insurance payout and the cost of replacing the vehicle with a new one of the same make, model, and specification (or the equivalent if the original model is no longer available). This would be suitable for those who want to ensure they can replace their vehicle with a brand-new equivalent, considering potential price increases. With inflation currently being so high, the cost of replacing a vehicle can be considerably higher than when the vehicle was initially purchased.
3. Finance GAP Insurance
This kind of GAP Insurance is intended to cover the gap between the insurance payout and the remaining balance owed on a finance agreement or loan. It suits individuals who have financed their vehicle purchase, for example through a PCP, and are concerned about having outstanding finance payments if their car is written off.
4. Lease / PCH GAP Insurance
Lease GAP Insurance is tailored to cover the financial GAP between the insurance payout and the remaining amount due on a leased vehicle, including covering any early termination fees and outstanding rental amounts. This would be suitable for someone who has a vehicle on a lease such as PCH (Personal Contract Hire).
6. Return to Value (RTV) GAP Insurance
RTV GAP Insurance pays the difference between the insurance payout and the market value of the vehicle at the time the GAP Insurance policy was taken out. It is most suitable for individuals who buy their vehicle second-hand and wish to ensure they can recoup its value at the time of purchase in the event of a total loss.
Choosing the Right Type
Selecting the appropriate type of GAP Insurance requires a careful evaluation of your vehicle’s purchase method, your financial commitments, and how you anticipate your vehicle’s value changing over time. Whether you’re looking to protect against depreciation, ensure you can replace your vehicle with a new one, or safeguard against outstanding finance on a vehicle that’s been written off, there’s a GAP Insurance policy designed to meet your needs.
How Much Does GAP Insurance Cost?
The cost of GAP Insurance can vary widely based on several factors. Cost is the main part in determining whether GAP Insurance is worth it. Key factors include the type of GAP Insurance policy chosen, the value and type of the vehicle, the length of the policy, and where the policy is purchased. Prices can range from as little as £100 to £500. It can be even more for a policy term that spans five years. Prices at dealerships can be significantly higher, often at the higher end of the scale. It’s important to note that these figures are indicative and can fluctuate based on the specifics of each situation.
Tips for Getting the Best Deal
As alluded to above, purchasing from a dealership may not be the most cost-effective way to purchase GAP Insurance. Quite often you will find GAP Insurance added to the finance quote, only to be used as a negotiating tool. However, it pays to know the true value of that policy so you can negotiate with your front foot forward. We have listed some top tips for finding the best GAP insurance below:
- Use online comparison sites to review various policies and check direct quotes from insurers. This broad approach helps identify competitive rates and coverage options.
- Tailor your policy to match your vehicle’s expected depreciation rate and your financial situation. This is especially important if you have a loan or lease. Ensure the policy’s term aligns with your ownership or finance period to avoid paying for unnecessary coverage.
- Consider the length of coverage you need. Shorter terms may suffice if you plan to sell or settle the finance early, potentially saving you money.
- Pay attention to the claim limits and ensure they’re adequate for your vehicle’s value and potential depreciation. Also, be mindful of policy exclusions and deductibles, aiming for a balance between comprehensive coverage and cost-effectiveness.
- Look for policies that offer benefits like transfer-ability to a new vehicle, which can add value.
- Before committing, research customer reviews and the insurer’s financial stability to ensure they have a positive track record. Particularly pay attention to history of claim payouts and customer service.
Is GAP Insurance Worth It?
In conclusion, navigating the intricacies of GAP Insurance requires a thoughtful blend of research, comparison, and understanding coverage needs. By taking the time to evaluate your options, considering the length and level of coverage, and choosing a reputable provider, you can secure a GAP Insurance policy that not only meets your financial protection needs but also represents excellent value for money. You can then decide if GAP Insurance is worth it. Remember, the goal is to find a policy that offers peace of mind. Its sole purpose is safeguarding your vehicle investment against unforeseen losses without overextending your budget.
We invite you to share your experiences and insights on purchasing GAP Insurance. Have you found particular strategies that worked well for you? Are there providers you’d recommend or advise to approach with caution? Your feedback not only enriches the conversation but also helps others in our community make more informed decisions. So, please, leave your comments below and let’s continue the discussion. Whether you’re a seasoned GAP Insurance policyholder or navigating these waters for the first time, your input is invaluable.