When it comes to getting coverage for a vehicle in the UK, it can be tricky knowing what’s required. UK drivers are legally obliged to obtain at least third-party motor insurance to be on the roads, whilst professional drivers may have to also get ‘hire and reward’ insurance as well as coverage for ‘business use’. With so many options and plans at your disposal, it can be easy to overlook the importance of GAP insurance when you’re covering your vehicle – let’s take a closer look at the benefits of signing up for a GAP insurance plan:
What is GAP Insurance?
– Guaranteed Asset Protection (GAP) Insurance is designed to cover the full value of your car should you make a ‘total loss’ claim. It covers the ‘gap’ or difference between the sum your insurance company pays out and the total needed for a replacement vehicle that’s financially equivalent in value. For example, if your new car is stolen or written off through no fault of your own, a ‘return to invoice’ GAP insurance policy would ensure that you recoup the full sum that you paid for the vehicle, rather than the (often depreciated) current market value as paid out by most insurers. As well as ‘return to invoice’ policies, popular variations include ‘return to value’, ‘vehicle replacement’, ‘finance’ and ‘negative equity’ GAP Insurance plans.
Why is GAP Insurance a good thing to have?
– Because most vehicles tend to depreciate in value from 15%-35% in the first year after purchase (and up to and above 50% after more than 3 years), taking out GAP Insurance is a reliable way of ensuring that you’ll get your money back if you’re forced to replace your vehicle. GAP Insurance could also be the perfect option for those drivers who own expensive cars that are likely to plummet in value, are in debt to finance companies or whose vehicles are no longer worth completing an existing finance or leasing agreement.
Things to consider when taking out a gap insurance policy
– When shopping around for a GAP Insurance policy, always take your time and ensure that you go with a reputable provider. You can purchase competitive policies from banks, insurance companies, financing and leasing businesses and dealerships – it’s worth noting that dealerships are not permitted to sell you GAP Insurance for a new car until 2 days after the initial purchase. Once you’ve found a reliable policy provider, some important factors to take into account include the length of the policy (they are typically fixed-term between 2 to 4 years) and its specific features, which may include both benefits and limitations. It’s also essential that you sign up with a policy that’s easy to cancel should you need to do so. Consider the current market value of your car when looking for a suitable plan and remember that it’s probably not worth activating GAP Insurance if your vehicle is less than 1 year old.