One of the important aspects of comparing Vehicle Replacement Insurance products in the market, is to check how the settlement would be made in the event of a claim. If you assume it is always done the same way then you may be in for a shock!

The basis of Vehicle Replacement Insurance is quite simple, if your vehicle is deemed a total loss by your motor insurer then the cost of its replacement may be higher than you originally paid. Lets be clear what we mean by replacement, this would mean the vehicle equivalent to the one your originally drove away from the showroom, same age and mileage at that time. That means if the vehicle was brand new, then it is the cost of the brand new equivalent that is covered, if it is 1 year old when you bought it, then it is the year old replacement cost that is used.

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Vehicle Replacement Gap that gives you a new car or cash?

Common sense tells you that the equivalent replacement vehicle will go up in price, so on the face of it Vehicle Replacement Insurance can be a really popular choice. However there is one very important aspect to compare and consider………how is a settlement made.

You see there are two camps with providers here. The ‘old school’ will reserve the right to provide you with an actual replacement vehicle, whereas others will actually pay the replacement funds to you instead.

Which is best?

Well let us imagine that you take a 4 year VRI Gap policy on your new Ford Focus. Three and a half year later the car is stolen, just when you were thinking about trading it in for a C Max people carrier.

Would you prefer another brand new Ford Focus, or to be paid the cash for a brand New Ford Focus, allowing you to add to this amount to buy the C Max you actually now need.

Can you see how crucial being paid the replacement funds, instead of getting a replacement car may be? How many times do we opt for exactly the same car each time we buy one?

We think it may be nice to have a choice, and if you are looking for a Vehicle Replacement product then you may want to avoid one that reserves the right to provide you with a replacement vehicle!

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