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gap insurance for motor vehicles

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daysleeper_2
daysleeper_2 Posts: 39 Forumite
edited 18 January 2016 at 5:11PM in Insurance & life assurance
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I ve just bought a brand new car after my old one was hit by a lorry and written off. This has left me out of pocket as the insurance payout was not very good. I have heard about GAP insurance which covers the difference between market value and original price. Can anyone give me the pro's and cons of this insurance and is there any reputable companies that could be recommended
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Comments

  • MarkyMarkD
    MarkyMarkD Posts: 9,912 Forumite
    Part of the Furniture 1,000 Posts Combo Breaker
    It doesn't do what you think it does.

    For one thing, if you bought a brand new car and had it written off within a year, your insurer would replace it with a brand new one.

    Once it's over a year old, there's no way anybody is going to pay for you to get a brand new car.

    What GAP insurance does is cover the gap between the insurance payout (based on current value) and the outstanding balance on a loan to fund the purchase. So it avoids you being left with no car and a partially outstanding debt.

    You would still not have the money to buy another brand new car - but you would at least not have a debt around your neck.

    Normally the lender would offer it to you if you purchased a car on a car-related loan. You can get it stand-alone, though - a quick Google reveals one company offering it for a fixed price of £168 on any car: here.
  • Malestrom
    Malestrom Posts: 983 Forumite
    The other problem with getting GAP insurance from a dealership is that you can find that the money paid out by the insurance is given as a credit against a replacement car from that dealer, rather than actual cash in your hand. Therefore, should you have to claim, you then have to buy another car from the original dealership. This was in VERY small print on the GAP insurance that we had when we bought a car a few years ago....luckily we didnt need to claim.
    He huihuinga taangata he pukenga whakaaro – A meeting of people; a wellspring of ideas (Maori proverb)
  • Many thanks, it seems well worth taking out, I can't believe it is not common knowledge. I agree about the dealer version of insurance. It is very overpriced, as I imagine they take a nice chunk of commision for themselves.
    I have found a policy for £199 for 3 years which pays the difference between what the insurance gives you for book price of your vehicle and the invoice price. Take it from me its a small price to pay
  • MarkyMarkD
    MarkyMarkD Posts: 9,912 Forumite
    Part of the Furniture 1,000 Posts Combo Breaker
    d514

    Thanks for your informative post - I didn't realise that the upgraded options you mentioned were available, as well as the basic GAP cover which just covers the finance shortfall.
  • AWOL_2
    AWOL_2 Posts: 210 Forumite
    Gap insurance for cars. Are they worth while!!!
    Any good deals out for them.

    This is how they work!

    When you buy a new car - if its ever written off or lost and never recovered, Gap insurance will pay the difference betweem what the insurance company pays out and the invoice value of your car.

    So eg. Buy a new car £20000
    Two years later its written off. Insurance value the car and give you £10000.
    You might still owe money to finance etc maybe another £12000 so you still end up paying £2000 finance for a car you dont have!! Not a nice position to be in.

    Gap insurance would give you the difference between the insurance payout and the invoice price. Thus they pay you another £10000. So basically you have the invoice price back. And your free to go and buy yourself another brand new car. Sounds good doesnt it?

    Is this sort of scheme a good one? Whats your views? Anyone taken one of these out? Do the insurance companies pay out quickly? Stupid question i know!! ha.

    www.click4gap.co.uk
  • Savvy_Sue
    Savvy_Sue Posts: 47,336 Forumite
    Part of the Furniture 10,000 Posts Name Dropper
    Worth looking on Honest John for this: I know questions have been asked about GAP insurance in The Back Room because that's where I looked when I was wondering whether or not to take it out.

    FWIW, we took out the 'middle' level, ie back to invoice level rather than full price of similar spec new car. Haven't had to claim yet ...

    PS, forgot to say we took it out separately rather than through the car showroom, about half the price. Showroom tried to tell us their deal was better, but IIRC they only offered the top level, which we thought was overkill.
    Signature removed for peace of mind
  • I understood that when you insure your vehicle that the Insurance Company undertook to "indemnify" the customer against any loss. The insured should neither profit or lose in case of claim. So I find it strange to see Insurance Companies offering Gap Insurance. Apparently this is the difference between what you are paid as a result of claim & the actual cost to replace your vehicle. Any experts out there that can reconcile the two ?
  • blue_haddock
    blue_haddock Posts: 12,110 Forumite
    There are two types of Gap insurance - one which pays the difference between the insurance settlement and any finance owing on the vehicle and the other which pays out the difference between the settlement and the original invoice price of the vehicle.

    So in case 1 your paid out £3000 from the insurance and you owe £4000 - the gap payment would be £1000. In case 2 your paid out £3000 still but because you originally paid £9000 for the vehicle the gap payment would be £6000.

    The price difference between the two should be fairly minimal and i know which one i prefer.
  • Hi, Folks,
    I'm new to this so If I am going over old ground please point me in the right direction.

    I am in the process of buying a new car and the dealer is offering Gap insurance to cover the additional potential loss above that which my insurer will pay if the car is written off within 3 years and the original purchase price.
    Is this a policy woth having or is it another insurance rip off. The cost is £399 for 3 years cover.
    Cheers. :beer:
  • Savvy_Sue
    Savvy_Sue Posts: 47,336 Forumite
    Part of the Furniture 10,000 Posts Name Dropper
    If you decide you want it, you can get it online, may not be any cheaper but there are various levels of cover and you may decide you don't want the top level (which is almost certainly all the salesman will offer).

    The key questions are, how are you paying for the car? and how would you replace it if it was written off before you'd finished paying for it?

    We've taken it out at the level where it settles the finance if the car is written off before we've finished paying for it.

    Of course others will be along before long to say "Don't buy new, the depreciation the moment you drive off the forecourt is horrendous" etc etc etc. ;) They are of course right.
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