Gap Insurance is a subject that some people know very little about ( I have heard suggested that some so called ‘experts’ can be added to this list too!). However, if you count youself amongst the uninitiated, then do not be too hard on yourself, there is little out there to give you a definitive guide, and what is there can be confusing to say the least.
Gap Insurance Fundamentals
First question: What is Gap Insurance?
Actually this is where the confusion can begin, because the term ‘Gap Insurance’ can mean different things to different people. Take a look at any internet forum who have a discussion on the subject, and you will see arguments over what exactly Gap Insurance is, and several definitions given by different people. Actually, they are all right in a way, as ‘Gap Insurance’ the generic term for a a supplementary motor insurance policy that can cover depreciation on your vehicle.
However, which aspect of depreciation are you covering? The finance shortfall, the loss against the invoice price or the loss against the replacement cost? All three types can be covered by different types of ‘Gap Insurance’, namely finance gap, return to invoice gap and vehicle replacement gap insurance.
We have expanded on each type several times, but please understand that there are several types of Gap Insuranceavailable in the UK today.
Another question that is often asked is what is the ‘claim limit’ on the policy, and how do you know you have the right one?
Well if your buy a policy from a motor dealer, they may well have not even mentioned the ‘claim limit’ to you. This is because they often have fixed claim limits on the policies they sell. This could be a £10,000 limit on a £25,000 vehicle. So if it were RTI Gap Insurance, you would have a maximum of £10,000 claim to get you back to the invoice price in a 3 year period. Would this be adequate?
Claim Limits on policies can be varied from online brokers, and it is important to pick one that is sufficient for your policy type and length of cover. There is now magic formula to how to choose a Gap Insurance claim limit, but there are guides out there for you.
Gap Insurance vehicle price?
Our last query may seem a little obvious, but it does cause some consternation. When you get a Gap Insurance quote, you are asked for the vehicle price or value, so what do you put in here?
Is it the list price? The amount you have to pay back on finance?
Actually, neither, for RTI, VRI or Finance Gap Insurance it would be the actual ‘total price for goods’ as shown on your invoice. This is the cash price if you like, AFTER you dealer/manufacturer discount has been taken off, but BEFORE your part exchange or finance deposit is taken off.
Check with your supplier if you are not sure.
Some more Gap Insurance questions answered by GapInsuranceTV!