Do I Need Gap Insurance?
Let’s try and demystify Gap insurance as we take you through the what, the why, and the where. Often overlooked, Gap insurance can stop an inconvenience form becoming a nightmare.
The Risk
According to Direct Line Insurance, the number of vehicles written off every year equates to one vehicle every 90 seconds, 24/7 and 365 days a year.
In a study of the Gap Insurance market, the FCA found that over 1.1m customers protect themselves with Gap Insurance every year.
In December 2022 the Financial Conduct Authority warned motor insurers not to undervalue written-off cars when settling motor insurance claims. This follows a high number of complaints from motorists who received significantly less than they expected for their write-off and this makes an even stronger case for Gap Insurance.
What is Gap Insurance?
In most cases, a write-off leaves the motorist with a financial loss or debt, or sometimes both. Gap Insurance is an optional multi-year insurance to cover losses or debt that is not covered by fully comprehensive motor insurance.
Cash buyers - lose the vehicle depreciation value when a write-off occurs
Finance buyers - can be left with a debt or a loss of deposit - or both
Contract Hire users - can be left with a debt - or loss of advance rentals - or both.
The main Gap Insurance options explained.
Gap Insurance is the generic name for a range of 5 different types of Gap Insurances
Top Up Gap Insurance - pays an additional 25% of the fully comprehensive motor insurers payout.
Finance Gap Insurance - tops up the fully comprehensive motor insurers settlement, up to the amount required by the lender to settle a finance agreement that was arranged by the car dealer.
Contract Hire (Car Leasing) and Finance lease Gap Insurance - tops up the fully comprehensive motor insurers settlement, up to the amount required by the leasing company to settle a lease or contract hire agreement. Also pays a sum equal to three monthly rentals to give a contribution to advance rentals for the next vehicle (this is for contract hire ‘leased’ vehicles only).
Return To Invoice Gap Insurance - tops up the fully comprehensive motor insurers payout - back up to the original price paid for the vehicle.
Vehicle Replacement Gap Insurance - tops up the fully comprehensive motor insurers payout - up to the sum needed to buy an equivalent replacement, even if prices have increased.
Why is GAP Insurance so important?
When a vehicle under a contract hire agreement is written off - the fully comprehensive insurer may not pay enough to settle the lease. In some lease contracts, the leasing company may charge for;
The amount by which the insurer pays less than their ‘written down book value’,
The outstanding rentals, although some now discount those
Without Gap Insurance in place, the hirer would have lost their initial rental investment and is likely to have a debt to pay just to end their contract hire/lease agreement. They would also need to raise another sum as an advance rental for a replacement car.
For Contract Hire and Finance Lease agreements, there is only one type of Gap Insurance - Contract Hire & Finance Lease Gap Insurance. It is coincidentally one of the lower-cost forms of Gap Insurance.
According to Direct Line Insurance, the number of vehicles written off every year equates to one vehicle every 90 seconds, 24/7 and 365 days a year.
Contract Hire Gap Insurance premiums are calculated on;
1. Vehicle P11d value
2. Period of lease
3. How soon after delivery the Gap Insurance was purchased.
Contract Hire Gap Insurance premiums typically ranges from just 9p per day to 18p per day for a 4-year period of cover, less than the cost of a daily newspaper.
Unlike fully comprehensive motor insurance, Gap Insurance premiums don’t penalise young drivers or those that live in high-risk postcode areas or those with limited driving experience and low or no, no claims bonus.
Gap Insurance is usually less than the cost of insuring a smartphone and covers substantially higher losses.
Where do I buy GAP Insurance?
These products are normally first introduced and offered as an option by motor dealers, finance companies and leasing companies. According to a study by the Financial Conduct Authority, on average, motor dealers charge 115% more for cover than specialists like car2cover.
Motor dealers and leasing companies are specialists at what they do and some have limited knowledge or understanding of these insurances. As such many dealers and leasing companies offer cover with unreasonable limitations and unfair exclusions. For example, some motor dealers and leasing companies offer Gap Insurance that excludes theft when the thief has gained access to the keys - a common form of theft. Some policies also have a Market Value clause where the Gap Insurer will only pay ‘from’ the Glasses Guide recommended market value figure. In these cases, if the motor insurer pays less than the market value - the customer is still left with a financial loss despite having purchased Gap Insurance.
Our chosen GAP Insurance partner is Car2Cover and here’s why…
Car2cover.co.uk ‘designs’ the terms and conditions with insurers to eliminate unreasonable clauses and can do so because we specialise in these insurances.
In addition to the already low prices, when multiple policies are purchased for the same vehicle at the same time, we offer a ‘bundle’ discount of;
£15 off the combined total of two policies
£30 off the combined total of three policies
£45 off the combined total of four policies
If you use the Discount Code JIM10 at checkout you will get and additional £10 off any purchase.
To take advantage of this offer, call 01438 870615 and quote the code or click the link below and choose a time and date for car2cover to call you to provide quotations and deduct your special discount. The link is; www.calendly.com/car2cover/notaguru-discount-code
Get £10 off on us! - just call 01438 870615
Quote discount code JIM10
Why Buy Gap Insurance From Car2Cover?
A major A rated insurer,
5 star review rated,
Decades of experience in the Gap Insurance market at the motor dealer and insurance broker level,
Wider range of policy types and cover periods,
Designed by specialists in Gap Insurance to be more policyholder friendly,
Knowledgeable and friendly staff, not pushy sales people
Arrange a call-back from cars2cover for a free quotation including our discount by clicking this link or call 01438 870615 and quote discount code JIM10!
Gap Insurance Explained by DefinitelyNotAGuru