Why indeed do traditional motor insurers not offer Gap Insurance? This is a very good question, as you would have thought that the two types of insurance would go hand in hand. They both deal with the value of your vehicle after all, so why does your motor insurer not offer you Gap Insurance along with the other products it does offer like legal assistance and roadside recovery?
The truth is, well we don’t really know! However, there may be some clues when you look into the two types of insurance side by side.
Gap Insurance and Motor Insurance
As part of the marketing of this blog, we set up a twitter account (@GapInsure if you want to join the 700 following us!). I have to say we think twitter is a marvelous thing, and you can follow all kinds of interesting people, and get instant access to opinion all over the world.
As part of this we have ‘followed’ and are ‘followed’ by representatives of large motor insurers. Having delved a little with each, it is very rare we can find any reference to Gap Insurance from any of them, whether supplying direct to the public, or even underwriting policies sold by brokers or motor dealers. Why is this?
Well, if you look closely at the two types of insurance, despite the fact that they are both concerning vehicles, there are some clear differences as well.
Motor Insurance is an annual insurance, covering you to use the vehicle, and in the event that any accident or theft results in the insurers deeming the vehicle a ‘total loss’ they will pay the ‘market value’ of the vehicle at the time.
Gap Insurance on the other hand, generally is not an annual premium. For the most cost effective cover, policies are taken for up to a 5 year period, with some of the larger brokers. The policies are only activated if the motor insurer deems the vehicle to be written off.
The two policies may cause a conflict of interest too. If you had an insurance administrator who processed a motor insurance claim AND a gap insurance claim at the same time, inevitably there could be a conflict as to where the motor insurance policy would pay to, and where the Gap Insurance policy would pay from.
Motor Insurance vs Gap Insurance
Other issues could be for the retailer of the policies. In reality, Gap Insurance is a specialised and niche insurance product. To offer the products with any authority, the retailer would have to have a real understanding of the cover, and this is why the products have traditionally been offered from a motor trade background, and not an insurance backgroud. This is despite the fact that the policies are insurance items.
So in truth we do not really know for certain why the cover is not offered by motor insurers, but we suspect that whatever the reason, Gap Insurance is not likely to form part of you motor insurance renewal anytime soon.