As soon as you buy a new car and drive it off the forecourt, it depreciates in value. What a lot of drivers don’t realise is that if your car gets written off, you won’t necessarily get all of your money back; in fact a lot of insurance companies will only give you the total money for the current market value of the car!
This could put you in a sticky situation if you took your new car out with a finance deal. Even if you drive the car around for 6 months and you have an accident which forces the car to be written off, if the market value doesn’t equate to what you owe on your finance settlement, you’ll be the one who has to foot the bill – that is unless you have a gap insurance policy.
Whether you take this out with the dealership where you purchase the car from or thorough a specialist company like ALA, you’ll ensure you have that little bit of extra protection should something unfortunate happen.
What are the benefits of getting gap insurance?
It does what is says on the tin and bridges the gap between the current market value of the car and the remaining amount due for your finance settlement. If you own the car outright it will simply top up the pay-out from the insurer, allowing you to buy a replacement car of the same or a similar value.
What type of policy can you get?
There are a handful of different options when choosing a gap insurance policy is right for you.
Vehicle replacement gap insurance – covers the difference between the money you get from your car insurer and the amount your car would cost to buy new.
Return to invoice gap insurance – covers the shortfall between what your car insurance pays out and the exact amount you paid for your car. This can be for both brand new and second hand cars.
Return to value – covers the difference between the insurance pay out and the market value of when you bought the car.
Finance gap insurance – covers any money you owe to the finance company if your insurance provider does not repay your debt. This policy means you’ll have no car or cash after your claim, but your settlement will be paid off.
Whichever gap insurance policy you decide to go for is completely up to you and depends on how you bought your car and whether or not you would want or need to buy a brand new car if yours is unfortunately written off. Choosing a gap insurance policy could potentially save you a lot of money and a big headache if you end up in an accident.
© Sophie Jackson 2019