Finance Gap Insurance was the original type of Gap Insurance, or Guaranteed Asset Protection on the market. Developed in the USA, it hit the UK market in the 1990’s. Finance Gap Insurance was designed to cover any shortfall on a finance agreement, if your vehicle was written off. So, if you had a settlement figure higher than your vehicle value, you can pay off your finance and walk away.
It is the most basic form of Gap Insurance, and the most recognised. However, with the development of Gap Insurance over recent years, with VRI Gap Insurance, RTIGap Insurance and Combined products, has Finance Gap Insurance a thing of the past?
Have buyers moved on from Finance Gap Insurance?
To anwser that question, you need to consider your circumstances, and the way in which you purchase your vehilcle, and ask the following:
Will you ever be in the position that you owe more on finance than the vehicle is worth?
So which set of circumstances could that occur? Well, a long term finance agreement, interest bearing, with a small deposit are most likely to create a situation that means a finance shortfall. However, it is important to realise, that at some point of a finance agreement, your vehicle will be worth more than you owe. This had lead to the development of Combination Return to Invoice, giving both ‘Return to Invoice’ and Finance Gap Insurance style cover, giving cover for the higher of either the finance settlement or the original invoice price.
So has Finance Gap Insurance become outdated?
Has this form of gap insurance been designated for the Gap Insurance scrap heap? Well, actually it depends on the Gap Insurer you ask. Some Gap Insurer’s now do not offer Finance Gap Insurance at all, however of those who still provide it, strong sales are still reported for particular circumstances.
Vehicle purchases on PCP (personal contract purchases) , types of lease, and in particular, Contract Hire vehicles, could all benefit from Finance Gap Insurance. Where a customer has put a small deposit in a finance agreement, basic Finance Gap can be attractive, and is still proving popular. Also, Contract Hire deals, where you will never own the vehicle, a Finance Gap Insurance or Contract Hire Gap Insurance policy can cover any outstanding rentals that your hire company may demand.
The cost of Finance Gap Insurance premiums are the lowest amongst the Gap Insurance available in the UK. Also it it the only style of Gap Insurance available over 5 years, to match long term finance agreements. Recent quotes showed 5 year finance gap policies from £89, and even a specialist type cover for ‘Negative Equity’ Finance Gap, designed to cover finance agreements containing negative equity from a previous agreement.
So all in all, Finance Gap Insurance has found its niche, under the right circumstances, still worth serious consideration.
So there you have it, there is still some life left in Finance Gap Insurance after all!