GAP insurance

shopaholic2

Hi, some of you may have seen my post from last week, Hubby's car written off after being hit by someone skidding on black ice.
Well, today we find out it has, indeed, been written off, which isn't a problem as he has a courtesy car and can borrow a freinds until we get sorted.
I wanted to know if any of you genuis's (geniI?) knew about GAP insurance.
Hubby took this out when he bought the car, car is financed through Barclaycard, and he owes just over £4,000 on the finance (yeah, i know :eek:) so I wondered if the GAP would just pay the shortfall from what the insurance company offer (which will prob be around £1,200, if that), or if it pays back what hubby paid in the first place.
Or will they replace the car, like for like, and we keep paying the finance?

I bought my car 5 years ago, brand new for £25k, and took out gap, but had no finance. so i knew if it got written off I would effectively get a brand new car or £25k, but I'm not sure if it works the sameon finance.

Any ideas, thoughts, advice would be greatly welcomed.
Thanks....

AdrianHi

That depends on whether it is a "Return To Invoice" (RTI) type GAP policy or one intended just to cover the shortfall between vehicle value and outstanding finance.
I came to the view some time ago RTI was the only one worth having given the premiums charged.
Have a look at the terms and conditions of the policy and see what they say.

Personally I don't automatically assume taking out finance is always bad, depends on the situation and the rate.

shopaholic2

Hi, lostinheaven the policy is for 5 years, the length of the finance, which has been running 2.5 years as of next month.
I've checked the policy and it says it pays off finance up to £5k,so we should be ok as hubby owes just over £4k.
Just have to see what happens now.

Just as a thought, when the insurance write the car off what then happens to said car?
Does it just get scrapped, and if so, by whom?
Ta!

AdrianHi

In the orginal post 2 cars are being talked about. Hubby's car that has been written off has been owned for 2.5 years out of a 5 year finance deal covered by the GAP (finance shortfall only) insurance. So he is covered though will only get the shortfall between the insurance payout and the outstanding finance paid out of it - if there is a shotrfall.

The other new car for £25K also had GAP insurance on it, assumed to be the RTI type.

magpiecottage

I'm not so sure Lostinheaven is right.

You need to see what the insurer does first. They may pay out anyway.

I think, if this went to an Ombudsman (and you are miles away from this yet) there is a fair chance that they would force an insurer to settle on the basis of what you were led to believe you were buying.

shopaholic2

HI ALL
I'm sorry I seem to have caused so much confusion!!
Hubby bought car 2.5 years ago, and it's financed for 5 years, so we're half way thru the finance. We paid £250 at the time for the gap insurance.
There's around a 2k difference in what the insurance company are likely to offer and what is still owed on the finance.

Thans for all your comments and thoughts on this, sorry to confuse!!

davetrousers

Apologies for jumping in, but I have a query on gap insurance too.

I know someone who is buying a car on finance for £155 a month for 48 months (total £7,440). I have just a had a quick look at click4gap and entered a 4 year term, with a claim limit of £7,500, the premium is £137. Does this cover the 48 month term, or is this for the first 12 months?

Thanks

continualdiamond

I would of thought £137 is for the whole term, not just a year. Bit extreme if it is.

I am looking to buy gap insurance today, had my vehicle since the 2nd Jan. Directgap are looking good as finance gap for me is £90 for the 3 years (which is what my finance is over) at a £7,500 claim limit. My APR is extremely high due to a poor credit rating, so whilst i know a lot of people say return to invoice is the best, in my case i don't think it will be, as the purchase price of the vehicle was £3995, but i will end up paying £6117 for it. So would rather have the security of knowing he finance was paid off with gap insurance.

AdrianHi

continualdiamond wrote: »

I would of thought £137 is for the whole term, not just a year. Bit extreme if it is.

I am looking to buy gap insurance today, had my vehicle since the 2nd Jan. Directgap are looking good as finance gap for me is £90 for the 3 years (which is what my finance is over) at a £7,500 claim limit. My APR is extremely high due to a poor credit rating, so whilst i know a lot of people say return to invoice is the best, in my case i don't think it will be, as the purchase price of the vehicle was £3995, but i will end up paying £6117 for it. So would rather have the security of knowing he finance was paid off with gap insurance.

Sounds like you have mis understood. Return to invoice will pay out the £3995 vehicle value which will be enough to pay off the outstanding finance with may be some left over - even if the total repayments due to high interest rate come to £6117 IF you keep the loan going for the full term. If you settle the loan early you stop paying interest early. What you want to check with this loan is if it is "front loaded" with interest payments. If you settle the loan after say 18 months will you have to pay around £2000 to do it? If it is much higher than £2000 the loan is "front loaded" (your paying mostly interest payments early on and not paying off capital borrowed) and you really want to avoid this type of loan if at all possible.