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GAP Insurance question

Raiden Feb 20, 2018

  1. Raiden

    Raiden Well-Known Member

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    Might be getting a new car this weekend but half is cash other half is with a credit card. Got a good quote for 3 years worth of gap but as it's technically not financed would I be covered by anyone?
     
  2. DrEskimo

    DrEskimo Well-Known Member

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    Yea mate. Whether finance is used it irrelevant. It covers the gap between what your car insurance values it based on market prices, and the amount you paid to buy it today.

    E.g. You pay £15k today and it's written off in 2yrs. Insurance values the car at £8k based on market prices, so pays you £8k. Your GAP cover will cover you the £7k between that valuation and what you paid to get you back up to the original £15k.

    It's generally advised when you take out finance, since you are liable to pay the finance company any shortfall, which will more than likely be greater than the depreciation based on the insurance valuation. E.g. you buy a new car for £30k on finance. It's written off 2yrs later and insurance pays out £18k. However, you still have £23k left outstanding on finance. So now you have to cough up an extra £5k to fully pay off the finance.

    It's arguably less important when buying cash, as you fully expect the car to depreciate, but I can see the attraction with having it. It could pay out thousands, yet only cost a few hundred.

    The question is how likely do you think it will be that you will have your car written off or stolen...?
     
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  3. Raiden

    Raiden Well-Known Member

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    Well for £165 it's worth it but didn't want it being nicked and I lose half my money because I used a credit card. I intend to keep the car about 5 years so at least the first 3 ill be covered if anything happens
     
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  4. DrEskimo

    DrEskimo Well-Known Member

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    Yea that wouldn't matter.

    Just make sure the level of cover is sufficient. Work out what you expect the market value will be in 3yrs (i.e. the lowest the insurance company will offer you during the policy) and then calculate the GAP needed. Make sure your GAP cover is up to that amount.

    Question though...why only 3yrs if you are keeping it for 5...? The risk of it being written off wont really change between years 3-5, and arguably the pay off would be even greater, as the GAP will cover a larger amount in these years?

    Is the premium for 5yrs loads more? Would be a kick in the b****cks if it got written off a couple of months into your third year of owning it...!
     
  5. Raiden

    Raiden Well-Known Member

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    Policy goes up a lot past 3 years plus a lot of them in there T & C won't pay out if the car has done more than 80k which it probably will by year 4 of ownership.
     
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  6. DrEskimo

    DrEskimo Well-Known Member

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    Ah makes sense. Yea not point then.
     
  7. EDRIAT

    EDRIAT Member

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    Are you sure? Of the ones I've seen the 80,000 mileage limit only applies at the time of buying the policy. E.g. you can't buy GAP insurance if the car has already travelled 80,000 miles or more. If you're looking at a policy under which cover becomes void once your vehicle reaches 80,000 miles it'd be a pretty poor policy and I'd gamble there are other issues with it too - check the rest of the terms carefully for things like market value clauses (where they reserve the right to revalue your vehicle as of the time you originally bought it and/or reserve the right to not cover any amount that the motor insurer pays out less than any given guide says your car is worth at the time of claim).

    Regardless, www.GAPinsurance.co.uk have no mileage limits at all, they can provide cover for up to 5-years and, if you end up selling your vehicle early, you'd cancel the policy and claim a pro-rata rebate of unused premium with no cancellation fees deducted.

    Also, the type of cover that DrEskimo describes is Invoice GAP insurance which aims to pay the difference between your motor insurance payout and the price you originally paid for the car. There's also Replacement GAP insurance which aims to pay the difference between your motor insurance payout and what it would cost at the time of claim to replace your vehicle with one of the same (or nearest equivalent) again - e.g. equivalent to the vehicle you bought at the time you first bought it.

    HTH
     
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  8. Raiden

    Raiden Well-Known Member

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    The one your talking about looks really good plus there a fiver cheaper. Think i'll be buying that one
     
    EDRIAT likes this.
  9. DrEskimo

    DrEskimo Well-Known Member

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    I can see how replacement GAP works well in a new car scenario, where the list price is essentially standard, but how does it work with used cars...?

    How do they determine the value of a similar used vehicle, particularly if there isn an exact model, specification and mileage of the one bought around when you claim? I imagine they rely on market value prices, in which case a return to invoice is probably more profitable...?
     
    EDRIAT likes this.
  10. EDRIAT

    EDRIAT Member

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    The gapinsurance.co.uk policy wordings permit the value of a replacement vehicle to be derived from any superseded equivalent vehicle at the time of claim if necessary and, I’m told, involves their claim administrator contacting dealers initially within a 50-mile radius of the policyholder’s home, supplying them with the details of the original vehicle and requesting quotes for an equivalent “today”.

    Obviously with a used vehicle getting an exact match on age and mileage alone will be somewhat of a challenge so I guess it’ll be about getting as close a match as possible.

    Specifically their Replacment GAP wordings say that it covers the difference between Motor Insurance payout and THE GREATER OF:

    1. The amount outstanding on finance or,

    2. The original invoice price paid or,

    3. The cost of an equivalent replacement vehicle at the time of claim.

    It then goes on to say that if an equivalent vehicle isn’t available at the time of claim on which to base a replacement price, the policy will revert to 110% of the original invoice price paid.

    Given that the difference in price between Invoice & Replacement GAP is usually relatively small but, the potential difference in the potential payout could be reasonably substantial, my opinion is that Replacement GAP is surely the better “bet”?
     

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