If you have never heard of Gap Insurance before you may be excused for thinking it is quite a new form of insurance. How wrong you would be! Gap Insurance, or Guaranteed Asset Protection to give it a full title, has been around since the 1980’s, when it was first offered in the USA. The traditional name for Gap Insurance is often called ‘Shortfall‘, and this term is still used today by many manufacturers to name their version.
Gap Insurance from humble beginnings
The first style was a form of finance gap insurance, which was designed to cover the shortfall on finance agreements and leases. With the rapid depreciation of certain vehicle types recognisesd, the popularity amongst vehicle buyers grew steadily.
As with all good ideas, the word soon spread, and Gap Insurance became available in the UK, via vehicle dealers and leasing companies. To begin with, many contract hire lease agreements included contract hire gap insurance as part of the rental payments.
Then came the next development in the field, RTI Gap Insurance, or Return to Invoice Gap Insurance. This provided both cash and finance buyers the ability to cover the original purchase price they paid for their vehicle.
Traditional routes of Gap Insurance purchases were the dealers who sold the vehicle to the customer. However, with the advent of the internet, information and now independent brokers have emerged, providing huge savings to premiums offered by the dealers.
Also there have been many changes in the types of vehicle available for Gap Insurance, with cars, motorbikes, vans, motor homes, HGV’s, taxi’s and driving school vehicles all available for such cover now.
With vehicles losing over 50% of their value in the first three years of their existence, and a steady depreciation thereafter, Gap Insurance has been a popular choice for vehicle owners for quite some time.
Recent and future developements in Gap Insurance
The most recent developments include the advent of VRI Gap Insurance, or Vehicle Replacement Insurance. This type of cover allows for the potential future replacement cost of the vehicle to be covered, not just the invoice price you have paid.
Other changes include the extension of the period of cover to 4 years for RTI and VRI, and this soon is to go to 5 years.
So there you have it, a history of this often misunderstood type of insurance in brief. As always we will keep you informed of all future moves in the world of Gap Insurance!