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GAP Insurance - What is it and why?

9K views 24 replies 7 participants last post by  GapInsurance.co.uk 
#1 · (Edited by Moderator)
If your vehicle is declared a Total Loss (aka "written off") through accident, fire or theft, your Motor Insurance will pay you the Market Value of the vehicle at the time of the incident which led to the Total Loss claim.

This "Market Value" payout could be considerably lower, than either the original price you bought your vehicle for, or if you originally bought a brand new vehicle, the cost of replacing the vehicle with a new one at the time of claim.

This is where GAP insurance steps in.


Types of GAP insurance:


Finance GAP insurance.

Traditionally, GAP insurance was purchased only if you financed your vehicle and in the event of a Total Loss (through accident, fire or theft), Finance GAP insurance paid the difference between your Motor Insurance payout and the amount outstanding on finance at the time of claim. Of course, due to the fact that the balance outstanding on finance decreases over time as you make your repayments, there comes a time (sooner or later) when the value of the vehicle (that which would be paid by the motor insurer in the event of a Total Loss) would be sufficient in its own right to clear the remaining finance without the assistance of a GAP insurance policy.

To this end, there's not much interest in Finance GAP insurance these days, due to far superior levels of GAP insurance cover being available instead. Read on...

Invoice GAP insurance.

Invoice GAP insurance pays the difference between your Motor Insurance payout and the original price that you bought your vehicle for. It's therefore suitable for cash buyers as well as those that have financed their vehicle. If you're a cash-buyer it means that in the event of a Total Loss event, rather than only having the depreciated "Market Value" of your vehicle (plus any funds out of your own pocket) to replace the vehicle with, you'd have the original invoice price to use again. In relation to financed vehicles, a claim on an Invoice GAP insurance policy would (in most cases) leave the policyholder able to clear any remaining finance and have money left over to put towards the cost of their next vehicle.

However, specifically in relation to financed vehicles, with some agreements (high interest rates and/or no or little deposits etc) it's possible that in the early days, the settlement figure of the finance agreement may be higher than the original vehicle invoice price. This is where a combined Invoice GAP insurance policy steps in. "Combined" refers to it being a combination of both Finance and Invoice GAP insurance, whereby in the event of a Total Loss, the policy pays the difference between the Motor Insurance payout and the original invoice price, or (if greater) the amount outstanding on finance at the time of claim.

For more information about Invoice GAP insurance, please click here.

Replacement GAP insurance.

For a brand new vehicle, Replacement GAP insurance goes even further, by paying the difference between your Motor Insurance payout and what it would cost to replace the vehicle with a brand new version of the same (or nearest equivalent) vehicle at the time of claim - even if the replacement vehicle costs more than the you paid for the original vehicle first time around.

For more information about Replacement GAP insurance, please click here.


You have New-For-Old cover with your Motor Insurance, do you need to buy GAP insurance?

We often have people tell us, or see people on forums having written that they don't need GAP insurance because their Motor Insurance policy covers them on a New-For-Old cover during the first year (or two if you're insured with SAGA or NFU).

Not buying GAP insurance because you have New-For-Old cover for the first year is not a sensible approach. The reason, is that GAP insurance policies are purchased for durations of up to 5 years at a time. If you're going to keep your vehicle longer than the New-For-Old cover period of your Motor Insurance and plan to buy GAP insurance only when your New-For-Old cover period has expired, you're going to be disappointed!

The type of GAP insurance you will be able to buy once your New-For-Old cover period has expired, will provide a considerably inferior level of cover to that which you can buy within the first 180 days of buying the vehicle. The trick (for want of a better phrase), is to purchase a GAP insurance policy around the time that you buy your car, but elect to defer the start date of the policy so that it starts when the vehicle is 12 months old, thereby avoiding duplicating cover in the first 12 months but enabling you to still secure the highest level of GAP insurance cover for the later years.


What can we offer?



  • Invoice or Replacement GAP insurance for vehicles purchased for up to £150,000
  • Claim limits of up to £100,000
  • Durations of 1, 2, 3, 4 or 5 years
  • Invoice GAP insurance for cars up to 10 years old (purchased within the last 365 days)
  • Replacement GAP insurance for cars up to 365 days old.
  • Cash Payouts.
  • No Market Value clauses

Thank you for reading and if you have any questions about GAP insurance, please do not hesitate to get in touch.

Of course, if you'd like a quote in the meantime, please visit: www.gapinsurance.co.uk

Regards

David
 
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#2 ·
Don't most GAP insurance policies allow you to defer the start date for up to 12 months while the 'new for old' insurance is active.
 
#3 ·
No. Well... it depends on your definition of "most". For example, the FCA estimate that well over 90% of all GAP insurance policies sold in the UK are sold via a Motor Dealer and to my knowledge there are very few Motor Dealer-sourced policies that will allow you to defer the start date of a policy.

It's a different story online though with a selection of companies offering the ability to defer the start date of a GAP insurance policy if you do have New-For-Old cover with your Motor Insurance. Although you shouldn't assume that all do, because that isn't the case at all.

However of the companies that do permit you to buy GAP insurance and defer the start date by up to a year from the date of first registration, each of them requires that you buy the GAP insurance within an initial time period after purchasing the vehicle and the longest of these is currently 180 days. If you wait more than 180 days to purchase, you will not be able to buy Invoice or Replacement GAP insurance covering you to the level I explain above, instead you'd only be able to get a form of GAP insurance that protects you to what your car was worth at the time you bought the policy, however even then it's not quite as straight-forward as that and confusingly, some companies still refer to it as "Replacement GAP Insurance".

For example...

  • You buy a brand new XF 2.2 Diesel R-Sport 163PS for £33,995 (price taken from the Jag website). You're the first registered keeper.
  • Within the first 180 days (6-months) you buy a Replacement GAP insurance policy.
  • at 2-years old, the car is written off. The cost of the brand new equivalent vehicle this time around has increased to £34,995
  • Your Motor Insurance pays out £19,523 (value taken from WhatCar Depreciation Calc')
  • Replacement GAP insurance pays the £15,472 difference between your Motor Insurance payout (£19,523) and the cost of buying a brand new version of the same (or nearest equivalent) vehicle (£34,995 in this example.)

OR

  • You buy a brand new XF 2.2 Diesel R-Sport 163PS for £33,995. You're the first registered keeper.
  • At 11-months old with 10,000 miles on the clock you buy what the provider calls a "Replacement GAP insurance" policy.
  • at 2-years old, the car is written off. The cost of the brand new equivalent vehicle this time around has increased to £34,995
  • However, an 11-month old version of (or nearest equivalent to) your car with 10,000 miles on the clock (because that what your car was at the time you bought your policy) is available for £29,000
  • Your Motor Insurance pays out £19,523.
  • Replacement GAP insurance pays the £9,477 difference between your Motor Insurance payout (£19,523) and the cost of buying an 11-month old version of (or nearest equivalent to) your vehicle (£29,000 in this example.)

In this case, waiting until near the end of your New-For-Old cover period to buy GAP insurance, sees you almost £6k short in the event of a claim. Now clearly, the figures above are really just guess work at this stage, but I've not included anything that's far-fetched, thus it serves to demonstrate the principle well.

If you're going to buy GAP insurance, it's far better to do so within the first 6-months and take advantage of the ability to defer the start date from those providers that permit it, than wait longer for an inferior policy.

That said however, it's also important to carefully check the terms of your New-For-Old cover before you elect to defer the start date of a GAP Insurance policy at all. For example some insurer's will revert to a Market Value payout in the event that they cannot source a physical replacement vehicle at the time of a New-For-Old claim and we're seeing more frequently insurers changing the criteria under which they'll agree to replace a vehicle New-For-Old - e.g. it used to be the case that if the car was going to cost more than 60% of what it was worth to repair AND if it was less than 12 months old at the time, it would invoke a New For Old replacement. However more recently we've seen insurers change this to say that they'll write it off if the cost of repair is more than 60% of what the car is worth at the time of loss, however, they'll only do a New-For-Old replacement if the cost of repair exceeds 60% of the manufacturer's list price for a brand new version of the same car at the time of loss - this leaves a potentially large financial "gap" within which the car could be written off, but not breach the threshold for a New-For-Old replacement and if this happened, you'd be needing your GAP insurance and regretting having deferred it.

Regards

David
 
#4 ·
ALA allowed me to defer my GAP cover due to my insurance providing GAP for the first year. However as the cover was far better with ALA I chose to start it immediately.


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#7 ·
ALA allowed me to defer my GAP cover due to my insurance providing GAP for the first year. However as the cover was far better with ALA I chose to start it immediately.
That's the point I make in my earlier post ChrisSB... For anyone considering deferring the start date of a GAP Insurance policy it's important to double check the terms of your New-For-Old cover before doing so.. for comparatively little difference in cost in can be better to have GAP insurance in the first year than not.

Out of interest, did you consider purchasing from us before you bought from ALA and if so, could we have done anything different/better to have gained your business?
 
#6 ·
The new regulation comes in to force in September (subject to feedback that they (the FCA) have requested by March 2015). In principle you'd expect it to be "good news" for online sellers but in reality I'm not sure it's going to be that much of a difference because the FCA have backed down considerably from their original proposals which included a consideration to ban car-dealers from selling GAP insurance full-stop.

The FCA has now proposed that from September 2015 dealers will have to abide by a 4-day opt-in period which will mean that from the point they introduce the customer to the concept of GAP Insurance there'll be a 4-day window in which the customer will not be able to buy their GAP Insurance. However crucially, it's the dealer that decides when this introduction should happen and therefore when the 4-days begins... for Franchised dealers selling a brand new car it'll mean very little difference to their existing sales process in terms of GAP (mention it at any point in the sale process and the majority of cars will take more than 4-days to arrive) - I reckon there's a good chance they'll just continue on as they always have.

The new proposals will though cause some issues for the likes of car "supermarkets" who market their service on a "drive-away-on-the-same-day" basis.
 
#8 ·
I believe I did get a price from you. The price wasn't much different (I cannot remember if it was higher or lower) and the reviews and recommendations on here about ALA made me choose. So nothing bad about you that I can remember. It was over a year ago now.


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#9 ·
I've just done a quote for my wife's Golf R: ALA £133-10% discount code = £119. Vs David (Frank Pickles) £130. That's pretty good as ALA are usually quite a bit cheaper, it's only the discount code that is making them cheaper in this case. Both quotes based on car at £28500 with £10k cover for 2 years for the higher replacement car cover, back to invoice was around £90. My last insurance claim was in 1987 so I'm reluctant to buy it as hopefully I won't need it, it is good value if you ever need to claim though.
 
#10 ·
Forum members get 10% discount off our prices too... so we'd be £117. (Our website isn't clever enough (yet) to have fancy promotional codes though :) You'd need to talk with us)
 
#11 ·
Just realised that Gapinsurance.co.uk is Frank Pickles. I have 3 GAP policies with them & can confirm that their customer service is excellent. Managing the policy online is a useful tool....eg changing reg when a personal plate is fitted.
 
#13 ·
I too can confirm that Gapinsurance.co.uk (Frank Pickles) provide excellent customer service, are very helpful and knowledgeable, with very competitive pricing. I have two policies with them. Just changed one policy (old cancelled and new policy issued) and was very pleasantly surprised at the amount of rebate on the old policy. David could not be more helpful. Online policy management clear and easy too. Thank you David.
 
#16 ·
Tell me the value of your car, duration of policy (inc' Claim Limit if you know it) and what price your invoice shows the GAP insurance policy at and I'll show you how much of a premium the dealers sell it at.
 
#24 ·
I think the word 'premium' is being a bit too kind! Double is usually the starting point.
 
#17 ·
Ok car is worth roughly £42k duration of policy is 3 years (not sure on claim limit) invoice shows £389 although I haven't paid for it yet so there is hope. I am keen to have it running from day one and intend to keep the car for the three years then trade in.
 
#18 ·
To be honest, £389 from a Jaguar dealer on a £42k car isn't so bad. I've heard of dealers asking for £600+ for the same... :eek:

Ok, so, according to this: http://gb.jaguar.com/owners/insurance/gap-insurance the Jaguar policy is an Invoice GAP insurance policy which, in the event of the vehicle being written off, will pay the difference between your Motor Insurance payout and the greater of either the original purchase price that you bought the car for OR (if applicable) the finance agreement settlement figure at the time of claim. In terms of a claim limit (the largest gap the policy will attempt to cover) they'll pay out up to the greater of either the original purchase price or £50k. In which case, with your policy it'll have a Claim Limit of £42k (though this is more than you'll ever need as clearly your Motor Insurer will pay out something for the car and the GAP insurance only has to cover the difference between their payout and the original price).

Market Value Clause:

It's worth noting here that the Jaguar policy includes a Market Value clause in relation to any Total Loss payout from the Motor Insurer (see page 6 of their policy booklet here: http://gb.jaguar.com/content/pdfs/uk_pdfs/financing/jag_gap_insurance). This means that in the event that the payout from the Motor Insurer is less than what they (the administrators of the Jaguar policy) believe is the Market Value of your vehicle, they will not cover the amount by which they will deem the Motor Insurer to have underpaid.

Along with us, almost all non-motor-dealer providers of GAP insurance (though some still do remain) have removed Market Value clauses from their policies as they're grossly unfair to the policyholder.

What can we offer?

I too, can provide you with an Invoice GAP insurance policy, for 3-years, with a Claim Limit matching the original £42k purchase price. However assuming the car is brand new and you're to be the first keeper, I can also provide you with a superior Replacement GAP insurance policy which, in the event of write-off, will pay the difference between your Motor Insurance payout and the cost of replacing the vehicle at the time of claim with a brand new version of the same (or nearest equivalent) vehicle - even if that replacement vehicle costs more than you bought the vehicle for first time around!

  • You can see details of our Invoice GAP insurance policy here.
  • You can see details of our Replacement GAP insurance policy here.
  • The terms and conditions for both policy types can be seen here.


How much?

Invoice GAP insurance @ £163.42 less your 10% forum discount = £147.08
Replacement GAP insurance @ £204.38 less your 10% forum discount = £183.94

That's a saving of £241.92 from the dealer's cost for Invoice GAP insurance, or a saving of £205.06 if you went for the superior Replacement GAP insurance.

Do the dealers sell it at a premium? ;)
 
#22 ·
Thank you for such an extensive and informative reply, you have a customer here for the £183.94 and I will ask the dealer to remove the added Gap insurance from the quote, shall I call you closer to the collection date to get firmer figures etc?

Thanks

Tommo
 
#19 ·
Hi Tommo1705

I have a VRI 5 year policy (1 year deferred) with Gapinsurance.co.uk, greater invoice value and it cost £235!!!
Great service from David, he is very knowledgeable and is always happy to help without pushing his products on you.

Quite refreshing in these cut throat times.

Hope that helps.

Kev
 
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