If you have bought a Gap Insurance product, or any other form of insurance for that matter, you may have seen the phrase ‘IPT‘ or ‘Insurance Premium Tax’ on you policy documents. So what is Insurance premium tax, and how much is it?

Gap Insurance and IPT

As with most things in life, your insurance policies are taxed by the government. If you buy a car then you pay Value Added Tax on the purchase, currently at 20%.

When you buy an insurance product then you would usually pay Insurance Premium Tax. The normal rate of this would be 6%, except in one very particular instance.

If you buy the insurance item from your motor dealer, and that would include items such as warranty and paint protection, the IPT, or Insurance Premium Tax must be charged at the same rate as VAT (20%). 

Gap Insurance from your nmotor dealer

So why is your Gap Insurance more expensive?

So if you buy your insurance item from a source independent from the sale of the vehicle, you are immediately saving 14% from your policy purchase. Couple this with the fact that online Gap Insurance brokers who produce volume sales of these products, will get far better supply prices from the insurers, you can see that you could save a huge amount from the main dealer gap insurance premiums without much effort.

Gap Insurance and IPT

So whether you are buying a gap insurance policy for a car, van or taxi, the Insurance Premium Tax charged by your dealer must be 20%. If you shop around online and look to a specialist online Gap Insurance broker, then the rate of IPT is only 6%.

Many salesmen in motor dealers are not aware of the difference between IPT rate for motor dealer and insurance brokers, but even the same policy, with the same supply price form the same insurer, could be significantly different in price simply due to tax.

This clearly gives you a distinct advantage by looking around the internet for your Gap Insurance policy.

 

 

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