For many of us, our car is one of our most prized possessions and one of the most expensive purchases we’ll ever make. Despite how careful we might be whilst driving and how well we look after our cars both on and off the road, anything could happen. Being unlucky enough to have your car stolen and not recovered, or to be involved in an accident where your car is written off, is never beyond the realms of possibility.
In addition to the emotional strain these eventualities can put you under; there will inevitably be financial implications. However comprehensive your insurance policy might be, if your vehicle is declared a “total loss” and you make a “total loss claim” to your insurer, most insurers will only pay out the current market value of your vehicle at the time of incident. This could leave you with a shortfall of thousands of pounds in comparison to the purchase price of the car, meaning that if you want to replace it with a like-for-like you’ll have to make up the outstanding balance.
To guard against this potential cost in the event of a total loss claim, you can cover yourself with a GAP (Guaranteed Asset Protection) insurance policy, to cover the difference.
How GAP insurance works:
When buying a new car for, say, £20,000, a consumer takes out both a comprehensive motor insurance policy and a GAP insurance policy. Over the course of the first three years of ownership, which is when a new car depreciates the most, the market value of the car may fall to, say, £12,000.
If an accident then happens or the car is stolen but not recovered, a total loss claim would need to be made. When the claim is approved, the motor insurer would pay out the market value of the car (the £12,000) and GAP insurance covers the outstanding balance of £8,000, which covers the remaining amount of the car’s original purchase value.–
What cover is available:
There are commonly three types of GAP insurance available, and at Warranty Direct we pride ourselves on arranging flexible policies that can cater to new or used cars either purchased from a dealer or privately*. The three types of policies offered by Warranty Direct are:
- Vehicle Replacement Insurance (VRI) – this covers the difference between what the motor insurer pays out and the cost of a brand new car of the same make, model and specification. This policy gives you cover even if the manufacturer’s prices have increased since buying the original car.
- Return to Invoice Insurance (RTI) – this covers the difference between what the motor insurer pays out and the original invoice price paid for the car.
- Return to Value Insurance (RTV) –this covers you for the difference between what your motor insurer pays out and the value of the car at the time when the GAP policy was purchased (which doesn’t need to necessarily be when you bought the car)
Other factors to consider:
As with most insurance policies, there are some limitations to Warranty Direct’s GAP Cover Insurance which you should be aware of before taking out a policy. Below are the most significant ones:
- If your motor insurer doesn’t pay out on your total loss claim then you will be unable to claim on your GAP insurance, as the two go hand-in-hand.
- Your GAP cover will be invalidated if the vehicle is written off due to an accident where the driver is under the influence of alcohol or drugs.
- Warranty Direct’s GAP Cover insurance isn’t available for electric cars, motorbikes, vehicles modified from the manufacturer’s specification or vehicles which are used for pacemaking, speed testing, other competitive events, or for hire or reward.
- The incident leading to the total loss of the insured vehicle must occur within Great Britain, Northern Ireland, Isle of Man, Channel Islands or the European Union.
It is of course important to consider the pros and cons of any policy of insurance and make sure you read the full terms and conditions in order to understand exactly what the policy entails and see whether it is right for you. You can obtain a copy of Warranty Direct’s full GAP policy terms and conditions from our website. Carefully considering all the factors such as the ones above will give you the freedom to pick a policy you know is right for you and prevent ill-informed decisions, which could lead to costly consequences.
Why Warranty Direct:
We’ve been providing GAP insurance since 2011 and are one of the leaders in the industry. With the cost of our GAP cover starting from just £136 for three years**, we aim to provide competitive and affordable cover which will help you avoid being out of pocket in the unfortunate event that your car is written off or stolen and not recovered.
Find out more about our policies here, so you can plan how best to cover yourself from potential financial loss.
* Types of product available subject to car eligibility criteria. See www.gapcoverinsurance.co.uk for more information.
**Price is based on a 3 year Return To Invoice policy for a Ford Focus 1.6 TDCI with a £5,000 claim limit.
Warranty Direct’s GAP Cover Insurance policies are underwritten by LAMP Insurance Company Limited, whose registered office is Suite 934 Europort, Gibraltar, company number 93562. LAMP Insurance Company Limited is licensed and regulated by the Gibraltar Financial Services Commission under the Financial Services (Insurance Companies) Act. Policies are administered by Warranty Direct Limited, Quadrant House, 20 Broad Street Mall, Reading, RG1 7QE, company number 3233010. Warranty Direct limited is authorised and regulated by the Financial Conduct Authority.