We have spoken about the importance of choosing the correct Gap Insurance Claim Limit with regards to VRI Gap Insurance before. However, how do you work oyut what type of claim limit you should look at with other types of claim limit, and why is this choice so important.
Picking your Gap Insurance Claim limit
This is important in the respect that you could opt for VRI Gap on a new car, for example, and find that becuase you have choosen an inadequate claim limit, you are still left thousands of pounds short of being able to replace your vehicle. Hardly the idea of VRI Gap cover?
The Gap claim limit is ultimatley your choice. The claim limit is the maximum amount that your gap cover can pay for the cover you have opted for. So for the common types of gap insurance that is between the vehicle market value when written off and for :
Finance Gap Insurance – the outstanding finance settlement figure
Contract Hire Gap Insurance – the outstanding rentals
RTI Gap Insurance – the original invoice price
VRI Gap Insurance – the cost to replace the vehicle with a model equivalent to the one at the time you purchased the policy
Why does your Gap Insurance Claim Limit differ between cover?
Basically because you are looking to cover different financial outcomes. If you compare Finance Gap and VRI Gap , the outstanding finance settlement is likley to be far less than the cost of replacing the vehicle with a brand new one.
Lets look at an example:
Car bought in 2011 for 15,000 pounds, 1,000 deposit on a 4 year finance agreement
In 2014 the vehicle is written off. Its market value is now 8,000 pounds, the finance settlement is 11,000 pounds, and the equivalent new model is now 17,000 pounds.
So for Finance Gap Insurance purposes, the difference between the market value and the outstanding finance is 3,000 pounds
For RTI Gap Insurance, the difference between the market value and the original invoice price is 7,000 pounds.
For VRI Gap Insurance the difference between the market value and the cost to replace is 9,000 pounds
So as you can see, the difference between the requirements for Finance Gap and VRI Gap cover is 6,000 pounds! Thats quite a difference.
For more information and in depth analysis of this question, read more on choosing a gap insurance claim limit. Stay tuned to GapInsuranceTV for more information, tips and ideas on the subject of Gap Insurance!