You must have probably heard of GAP insurance but not sure what it is all about and how important it is. Generally, GAP insurance is very beneficial for new car buyers as well as those who want to lease a car. This article is aimed at explaining the exact description of GAP insurance and also gives you a concise avenue to decide whether or not to opt in for GAP insurance.
A lot of people are not aware of the fact that if their car was to be written off or stolen during the period of their finance agreement, they would be responsible for settling any shortfall between their insurance company and finance company. This, when estimated, can amount to thousands of Pounds.
With GAP insurance, you are rest assured of a low-cost insurance that will protect you in the case of total loss events.
What is Gap insurance? How does it work?
Just like every other finance agreements, if you end your agreement too early, even though it may not be your fault, your finance company will likely charge you a settlement bill.
In case your vehicle is written off or stolen (and not been recovered by your insurance agency), there is a tendency that you will owe the finance company more than the amount that the insurance company will eventually pay out. This is due to the fact that insurance companies will majorly offer you “market value” for your car which may not be enough to cover up your debt to the finance company’s settlement figure.
As a result of this, you could be left with a “gap” to fill. For instance, a finance company’s settlement value might be £10,000 and the insurance company may value your vehicle to be £8,000. This means that you will be left with a £2,000 shortfall or deficit.
This could abandon you with a “hole” to connect. For instance, a back organization’s settlement figure may be £10,000 and the insurance agency may esteem the auto at £8,000. As should be obvious, there is a £2,000 setback.
In the conceivable occasion that your car insurance agency won’t pay out the whole settlement figure – you will be in charge of the deficiency. So in the above illustration, you would need to pay £2,000 out of your own pocket.
This is not a disadvantageofleasing a vehicle. You would end up in a similar circumstance if you had purchased a new car with a bank loan or on HP. In case of a discount, the sum you’d owe the finance organization is still prone to be more than your car insurance agency would pay out.
This is a result of depreciation. New vehicles overall lose 60% of their incentive in the initial 3 years which is probably going to bring about the estimated value of the car falling below the amount still owed on the advance.
Whereas, the good news is that with GAP insurance, all these shortfalls and deficits will be removed for you.
Do you need ‘Gap insurance’? – Will you benefit?
GAP insurance is an additional alternative insurance scheme. It makes available different protections and backings against risks that are not covered by a standard and comprehensive vehicle insurance policy.
Just in case anything happens to your vehicle, which may or may not be as a result of your error, GAP insurance will provide you with the opportunity to get another car without having any debt on you regarding the previous car.
Should in case you do not have GAP insurance cover, you will be the one to pay off the “gap” and will be out of your personal funds. With reference to the earlier example, would you want to pay off the £2,000 from your pocket or allow someone else to pay for it? Contact us today and let us pay it for you.