Do I Need GAP Insurance?
Posted on 18th September 2023 at 12:47
We all love our cars. They take us on unforgettable journeys with family, help us commute to work, and provide us with the freedom to explore the world. But, have you ever thought about what would happen if your car were to be stolen or involved in an accident where it's declared a total loss?
What about the difference between your car's actual cash value and the amount you owe on your vehicle loan or lease? This is where Guaranteed Asset Protection, better known as, ‘GAP insurance’ comes into play.
As an independent insurance broker, our mission is to ensure you have all the information you need to protect your assets and achieve peace of mind. Gap insurance, is an often-overlooked but invaluable insurance that can save you from financial turmoil in a time of crisis.
What is GAP Insurance?
Exactly as it says — a GAP Insurance policy is a specialised type of coverage designed to bridge the financial gap between the actual cash value of your vehicle and the amount you owe on your loan or lease. It serves as a financial safety net, protecting you from the potentially devastating consequences of being "upside down" on your car loan.
Here's a simple example to illustrate the need for GAP Insurance
Imagine you've just purchased a brand-new car for £30,000. A few months later, the car is involved in a serious accident, and the insurance company declares it a total loss. The actual cash value of the car, which factors in depreciation, is determined to be £25,000. However, the outstanding balance on your loan is £28,000. Without GAP Insurance, you'd be responsible for covering the £3,000 difference out of your own pocket.
Why You Need GAP Insurance
Protect Your Finances: As the example above demonstrates, GAP Insurance can safeguard you from unexpected financial burdens. In cases of total loss, you won't have to worry about paying off the remaining loan or lease amount.
No Depreciation Worries: New cars can lose value rapidly in their first few years. GAP Insurance ensures that you won't suffer the consequences of this depreciation.
Peace of Mind: Knowing that you won't be left with a hefty bill in the event of a total loss can provide you with peace of mind and allow you to enjoy your vehicle worry-free.
When You Would Need GAP Insurance
You want a brand new replacement car. If you paid £40,000 for a new car and 16 months later it's written off, your car insurer will pay out £19,000 (what it's worth at the time). If you're not happy with the lower amount – even though that's enough to provide you with a like-for-like replacement car – GAP Insurance may be worth it.
You owe money to a car finance company. If you have taken out finance to buy the car – for example, a personal loan. If the vehicle written off or stolen, although your car insurer will pay out the value it's worth at the time, you're still left paying off the value it was when you first bought it.
If you crash the car or it's stolen, you still have to pay back the whole loan. But if you had GAP cover, it would pay off the loan – meaning you're not left paying back money for a car you no longer have.
You don't need GAP Insurance if...
You'd be happy with a replacement car that is not brand spanking new.
If you aren't bothered by your car's depreciation. If your car is stolen or written off, your car insurance will pay out for a replacement – so you will get a car that is like-for-like.
If your car is less than one year old and you have fully comprehensive car insurance. Most fully comprehensive car insurance policies offer 'new car replacement' during the first year, so if you have this cover, and you're still in this period, you won't need GAP Insurance.
How To Obtain GAP Insurance
Acquiring GAP Insurance is relatively straightforward:
Through Your Dealership: Many dealerships offer GAP Insurance when you finance your vehicle. However, this coverage may come at a higher cost compared to other options.
Independent Insurance Broker: As an independent insurance broker, the team at Hedon Insurance can help you find the best GAP Insurance policy tailored to your needs and budget. We work with a specialist company to provide you with competitive rates and comprehensive coverage.
In a world where the unexpected can happen at any moment, it's crucial to protect your financial stability. GAP Insurance is a valuable tool that can help you avoid a financial disaster in the event of a total loss of your vehicle.
As your trusted independent insurance broker, we're here to guide you through the insurance landscape and find the right coverage to suit your unique needs. Don't let the gap between your car's value and your loan amount become a financial chasm; let GAP Insurance provide you with the peace of mind you deserve.
If you have any questions or would like to explore your options for GAP Insurance, please don't hesitate to contact us We're here to assist you on your safe journey to financial confidence and security.
If you have any questions about you home of motor insurance, please don't hesitate to get in touch with our team on 01482 707800 or email email@example.com.
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