What is Gap Insurance & Should I Get It?
Did you know that you could be left significantly out of pocket in the event of a write off? If you are in an accident and the car is declared a total loss, or your car is stolen and never recovered, you would only receive the current market value for the vehicle. Due to depreciation, this could leave you short by thousands and in a tricky situation.
What is Gas Insurance?
Fortunately, there is a good solution in the form of gap insurance. This is an optional type of insurance that covers the shortfall between the insurance payout and the amount originally paid for the car (or the amount outstanding on a finance agreement).
Is Gap Insurance Worth It?
Is gap insurance worth it is a common question that motorists ask. While it is not a legal requirement, you will find that it is a sensible level of cover because it means that you are not paying out of your own pocket for a car that no longer exists in the event of a write off or left struggling to afford a suitable replacement.
Gap insurance is particularly worthwhile for those that buy a new car as this is when depreciation is at its highest. A new car can lose as much as 35% of its value after 1 year and over 50% after 3, so those that buy new should seriously consider gap insurance.
In addition to this, you have to factor in how frequent car accidents happen. Car accidents happen constantly and you could be involved in a nasty accident without doing anything wrong. On top of this, car crime is a major problem in the UK with cars that are never recovered being deemed a total loss.
Types of Gap Insurance
There are a few types of gap insurance that are available and it is important to be aware of what these are.
Return to Invoice (RTI): RTI gap insurance will provide the exact difference between the amount that your insurance provider pays and the amount that was on the original invoice when you purchased the car.
Return to Value (RTV): Instead of using the amount originally paid for the car, RTV gap insurance uses the value of the vehicle at the time that you took out a gap insurance policy. This can be taken out at any time and is common for used cars.
Car Replacement Vehicle Finance: This type of cover will provide the amount to cover the cost of a brand new replacement (same age and spec) of the vehicle. This is similar to RTI but will also cover a rise in value of the car since you purchased it (helpful if you bought the car at a discount).
Overall, gap insurance is a sensible investment that could save you a fortune while providing peace of mind.