Do you need Gap Insurance? Many vehicle insurance companies are currently offering ‘new for old’ cover on brand new vehicles in the first year of your ownership. This means that you will be presented with a brand new replacement vehicle if you make a claim in the first year. So, if you bought a Gap Insurance policy, would you be paying for something you do not need in those first 12 months?
Do you need Gap Insurance at all?
The drop in value your vehicle will suffer in the first year is obviously not as great as it will suffer by the time it is 4 or 5 years old. Protecting your original invoice price with gap insurance must be done within a period of time after you purchase the car (the maximum currently available is 180 days). So simply purchasing a gap policy after your ‘new for old’ cover runs out after 12 months, will only protect the value of your 12 month old vehicle (known as an Agreed Value Gap), not the original price you paid.
So do you buy a gap insurance policy at purchase, and pay for insurance you already have covered, or do you leave it a year, and protect a lower value? In truth, neither option is ideal.
However, help may be at hand. Some gap insurance providers are now offering a ‘deferred’ option to return to invoice type policies, where you can defer the start date of your cover to coincide with the end date of your own ‘new for old’ cover. Therefore, if you purchase a 4 year RTI policy with a 12 month deferment, then you are covered from the end of your motor insurers replacement cover, followed by 4 years gap insurance cover based on your original invoice price. This arrangement will, in effect, cover you for 5 years.
We have not come across a motor dealer Gap product that allows you to defer the start date, however most of the major independent Gap Insurance brands will offer it for Return to Invoice and Vehicle Replacement products. By taking this option you can certainly provide yourself with the maximum value cover. It is also wise to check the terms of your motor insurance ‘replacement’ cover also, as you are reliant on this in that first year. However if you are happy with those terms then a deferred Gap Insurance can certainly maximise your ‘new for old’ cover for the longest period possible.