So you have insured your vehicle in case of an accident, theft or any unforeseen event. But, is that enough? Suppose you make a down payment on a car and after a few months it ends up getting stolen or totaled. Your motor insurance is going to make your settlement payout based on the current market value of the car, and not its actual price. This could leave you with a large outstanding bill to settle with the car dealer. GAP insurance was created to protect you in case you ever find yourself in such a scenario. The purpose of the insurance is to cover the gap between what your insurer pays out, and the balance of your loan or lease for the vehicle.
GAP stands for guaranteed asset protection. This type of insurance has been around for many years. It not only covers cars but also motorcycles. It makes sense to get GAP insurance if you are going to take a finance deal to purchase a car or motorcycle. One of the good things about GAP insurance is that you are eligible for a refund when you completely pay for your car or sell it.
GAP insurance is not a replacement for motor insurance. Instead, they complement each other to ensure that your investment in a car is well protected in different circumstances.
The value of cars is not stable. If you buy a brand new car today, its valuation will not be the same three years later. And when your insurer is calculating your payout, it will be based on the current value of the car rather than the price you bought it. There are many factors that affect the value of a vehicle. Usually, the value of most cars does not change very much in the first year when you buy it new. But after three years, the value could depreciate significantly. The state of the vehicle, as well as the model, are some of the things that influence the valuation of a car.
GAP insurance is not necessary for everyone. If you can pay outright for a car or you can do so in less than 12 months, getting gap insurance may not be necessary even if you took a loan to make the purchase. An ordinary car insurance will do.
If you buy a brand new car and pay for it in full, getting GAP insurance is more or less redundant. If you were to lose the car, your insurer is going to provide a vehicle for you that is the same brand and condition as the one you lost. However, if you take out a loan to get a car, then you need to get GAP insurance. This is because if the car gets damaged or totaled, you will not be left with the burden of paying off the remaining amount that you owe from your loan. The chances are that your insurer could deem the value of the vehicle to be much lower than its original price. By getting GAP insurance, you will be completely covered; your motor insurer will take care of getting you a replacement vehicle while your GAP insurance will alleviate the cost of the loan you took out to get the car.
Usually, you can get GAP insurance from your car dealership. There are also licensed brokers who deal in GAP insurance. Many experts recommend buying GAP insurance from brokers rather than a car dealership since the latter tends to be more expensive. Another advantage of buying from a broker is that you are going to get additional information and tips on the right policy to choose.
In 2015, UK authorities introduced new rules governing the sale of GAP insurance. According to the rules, buyers must be provided with all the information they need to make an informed decision on the GAP purchase. Also, sellers of GAP insurance must have a 4-day deferral period so that the clients are not coaxed into signing up for the insurance on the same day that it is introduced to them. The rules are necessary because GAP insurance had earned a negative reputation over the years due to the fact that many felt they were pushed into buying it. With the latest rules, you can assess the GAP insurance packages being offered to you properly, and even assess prices from different providers to determine if you are getting the best offer.
There are various types of GAP insurance. Usually, each provider has its own set of GAP insurance policies to offer. The prices for GAP insurance policies differ from car to car, and from one dealer/broker to another.
Some GAP insurance packages like finance Gap insurance are made to help cover the cost of financing the loan for a car. There is a lease GAP insurance policy that is meant to help take care of the fees and other costs that may be incurred from damaging a leased car or having to end a leasing agreement prematurely. There is a vehicle replacement GAP insurance plan that was created to add to the payout from your car insurance to replace your vehicle with a new one. Sometimes GAP insurance is added to your package by your provider, so be sure to ask and check the paperwork properly.
It is important to ensure you understand all the features of a GAP insurance policy before you sign up for it. Brokers are usually glad to provide more insight on the features of the different insurance packages they have to offer.