GAP Insurance - what value / DL insurance

slipp_digby

I am just about to get a new car which is costing about £25k after discounts (about £2k below list).

While I was ordering i got offered the inevitable GAP insurance. After I got home and eventually stopped laughing at the £565 quoted, I did a bit of a trawl on the internet to see what I could get.

Couple of queries, wonder if anyone can common sense check my reasoning:-

Dealer policy is 'unlimited GAP cover' which also pays for the excess on my insurance in the event of a claim (probably about £400 excess as its a high risk vehicle). This seems a bit daft when the car is only worth a total of 25k and the 'GAP' payout is presumably just the GAP between my insurers offer and what it is actually worth list price.

For a 25k car is a sensible assumption that the biggest GAP is likely to be a total loss claim on the car during year 1 i.e. when the depreciation is greatest. I was thinking that the GAP in the event of a claim is only likely to be at max, say £5k which I can get on a 3 year policy for about £100.

Finally to complicate matters I believe my Direct Line Car Insurance offers a new car replacement during year 1 in the event of a total loss claim. Does this impact on the value of taking out GAP in this case?

MX5huggy

There are all sorts of defferent names given to various GAP policys.

When I was involved with it there were 2 basic types.

Total Loss and Shortfall.

Total Loss pays the difference between the insurance payout and the original purchase price of the car.

Shortfall pays the difference between the insurance payout and the out standing balance of any finance on the car you have. Leaving you debt free to get another car.

from what you are saying I think you are considering a total loss policy, if this is correct the biggest GAP is not in the first year but right at the end of the policy (and you can get 5 year GAP) as this is when the car will be worth the least and the GAP policy will have to payout more as a typical car is worth half what it cost new after 3 years.

I belive most insurance policys offer a new car if you have a total loss claim in the 1st year of the cars life.

slipp_digby

MX5huggy wrote: »

from what you are saying I think you are considering a total loss policy, if this is correct the biggest GAP is not in the first year but right at the end of the policy (and you can get 5 year GAP) as this is when the car will be worth the least and the GAP policy will have to payout more as a typical car is worth half what it cost new after 3 years.

so for a 25k car i intend to keep for three years which will have a residual value of about £15k by then, GAP cover for 3 years at 10k would give me back to my purchase price right through to when i sell it at the end of year 3.

so i would be insuring against ANY depreciation in the event of a total loss claim.

koexelek

Never really got it with GAP insurance.

Why doesn't the first insurer charge you more and pay out the true value of the car ?

Would save a lot of messing about

slipp_digby

koexelek wrote: »

Never really got it with GAP insurance.

Why doesn't the first insurer charge you more and pay out the true value of the car ?

Would save a lot of messing about

isnt the point of GAP to OVER insure above the TRUE market value? i suppose the original insurer could do this, they ask what the value of the car is

to be honest, I have only considered it because it is quite a high risk car and i dont have to have a tracker fitted to insure it.

there is also the chance i will put it through a wall backwards :rolleyes:

i think it may be £147 well spent

koexelek

slipp_digby wrote: »

isnt the point of GAP to OVER insure above the TRUE market value? i suppose the original insurer could do this, they ask what the value of the car is

It's to ensure that you get the true market value if your car is stolen.

Whatever you say your car is worth, the insurance company will only usually give you the lowest possible price for that car that they can get away with.
Believe me, I know. I had a car stolen, and after the car insurance company had paid out, I had to find another £1500 out of my own pocket to pay off the finance:mad:

I have gap insurance on my latest car, but i think the whole thing is ridiculous.
Surely if the first company are underwriting a £20000 car against theft, they can fix the premiums accordingly.

You would not have a life insurance policy where, if you died the company only offered your dependents £90k if you were insured for £100k:rolleyes:

raskazz

koexelek wrote: »

Whatever you say your car is worth, the insurance company will only usually give you the lowest possible price for that car that they can get away with.
Believe me, I know. I had a car stolen, and after the car insurance company had paid out, I had to find another £1500 out of my own pocket to pay off the finance:mad:

I have gap insurance on my latest car, but i think the whole thing is ridiculous.
Surely if the first company are underwriting a £20000 car against theft, they can fix the premiums accordingly.

You would not have a life insurance policy where, if you died the company only offered your dependents £90k if you were insured for £100k:rolleyes:

Everyday motor policies are always based on market value. If you are suitably risk-averse, buy GAP insurance. This is much simpler for the consumer and the insurer considering that motor policies are annual not long-term; that GAP insurance is really only suitable at the point of purchase; that it would be administratively burdensome when applied to normal motor insurance; and that it would potentially be an invitation to fraud if offered as standard on motor policies. Don't really see why it's such an issue to you tbh.

koexelek

raskazz wrote: »

Don't really see why it's such an issue to you tbh.

it just p~sses me off when you pay for an insurance policy, then it doesn't pay out fully.

I think it's also a joke when you insure a car and they say, "what is the value of the car, sir?"

Whatever you can get away with paying me if it get's stolen :rolleyes:

MX5huggy

slipp_digby wrote: »

so for a 25k car i intend to keep for three years which will have a residual value of about £15k by then, GAP cover for 3 years at 10k would give me back to my purchase price right through to when i sell it at the end of year 3.

so i would be insuring against ANY depreciation in the event of a total loss claim.

Correct so your £200 - £500 looks good value if you think you are likley to have a total loss.

slipp_digby

MX5huggy wrote: »

Correct so your £200 - £500 looks good value if you think you are likley to have a total loss.

Managed to find 'back to invoice' GAP for £160, which works out at £53 per year over the term of the policy (3 years by which time I will be trading in/selling). Pays out up to £10,000 maximum GAP.

When I look at it in those terms I think this is quite good value.

RabbitMad

koexelek wrote: »

it just p~sses me off when you pay for an insurance policy, then it doesn't pay out fully.

I think it's also a joke when you insure a car and they say, "what is the value of the car, sir?"

Whatever you can get away with paying me if it get's stolen :rolleyes:

I've just had to renew my policy. Getting quotes it asks what is the car approximately worth in order to set the premiums.

If you come to claim the insurers usually offer the recommended trade price of the car as they claim thats what the market value is. The ombudsman dislike this approach as most people don't buy their cars for trade prices but rather from dealers.

Therefore you have to persuade the insurance company that you are likely to be buying a replacement car from a dealer and get them to up their offer. You can do this by getting dealers advertised prices and then knocking off the discount you think you'd be able to negotiate.