GAP insurance - where is the catch ?

Ivenofinmoney

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I have just bought a 3 year old car, which I financed about 50% of it. The dealer said that he would throw in GAP insurance for free, as it turned out he had discounted the purchase price of the car and charged full whack so I shall be canceling that as I can clearly get it much cheaper else where.

However my question is, is this insurance not open to massive fraud or have I missed something ?

Purchase price is roughly £25k paid 50% deposit and financed the rest over 2.5 years.

click4gap's return to invoice policy is a 3 year policy, given the mileage I do previous experience tells me the car will be worth £10k tops by that time, so if in the last month I was to have a total loss accident, would they really stump up £15k ?

There must be a catch ??

Not suggesting I would purposefully stage an accident but If this is true an accident towards then end of the 3 years could be very lucrative, I may take out a policy and even let the wife drive it for the last six months :rotfl:

AHAR

GAP insurance pays out the difference between any payout from your normal insurance and any remaining amount owed on the car by you.
With your 50% deposit and shortish 2.5 year repayment period there may not be any point where you owe more than your car insurance policy would value it.
Maybe that's why you got the GAP insurance for free.

thenudeone

Agree with AHAR.
You car is currently worth much more than the outstanding loan and is likely to remain that way for the life of the loan, so gap insurance is of little value to you.

BoGoF

I think you've misunderstood what GAP insurance is. You don't get a payout of the difference of what it's worth if written off and the purchase price.

Ivenofinmoney

Have to say my understanding of GAP insurance was that suggested by (AHAR/thenudone/BOGOF).

But I think what lostinheaven has said is right, just cant believe an insurance company would offer something that could so easily be miss used.

Reading the T&C's of the policy the Dealer supplied there are a couple of strange things ...

Definitions
Wear and tear means the gradual deterioration associated with the use age and mileage of the vehicle.

Whats Covered
this insurance is designed to pay for the financial shortfall between the amount you receive from the motor insurance policy in the event of your vehicle being a total loss following damage, fire or theft in the UK and the greater of the following:

• the amount you originally paid for the vehicle up to the claim limit as shown in the policy schedule

or

• The outstanding balance amount you require to settle your finance agreement.

Whats Not covered

• Any amount deducted by the insurance company in respect but not limited to salvage, excess over £250, wear and tear or any damage previously sustained to the vehicle in any incident not resulting in the vehicle being declared a total loss.
• Wear and tear.
• Any Costs arising from depreciation in the value of the vehicle other than as specified in the What is Covered section.

** there are a load of other clauses here which are fair enough.

As I read those definitions / clauses it could arguably read....

This is an insurance policy to cover the gap between what you paid for the car and its market value at the time of the accident (this sounds like a fair definition of depreciation to me) although depreciation caused by using the vehicle is not covered :think:


I can understand the value of covering the finance GAP on a brand new car when it's value drops the minute you roll it out of the showroom, but would be intrigued to hear of anyone who had successfully PROFITED from one of these invoice GAP policies, i.e. got back the full value of what they paid for the car despite the car being worth far less then they paid for it due to depreciation.

Ivenofinmoney

AHAR wrote: »

Maybe that's why you got the GAP insurance for free.

As I said, it turns out I didn't get it for free, they discounted the price of the car by £500 and charged me £500 for the insurance :eek:.
Had I known I would have point blank refused it.

AHAR

Ivenofinmoney wrote: »

• the amount you originally paid for the vehicle up to the claim limit as shown in the policy schedule

What's the claim limit?

Kilty_2

Ivenofinmoney wrote: »

As I said, it turns out I didn't get it for free, they discounted the price of the car by £500 and charged me £500 for the insurance :eek:.
Had I known I would have point blank refused it.

This is usually how stuff is "thrown in" to deals - would you rather have paid the price you agreed and NOT had gap insurance?

Do you think the dealer will sell you the car for £500 less without GAP? :rotfl:

Flyboy152

Ivenofinmoney wrote: »

As I said, it turns out I didn't get it for free, they discounted the price of the car by £500 and charged me £500 for the insurance :eek:.
Had I known I would have point blank refused it.

But you would have paid five hundred pounds more for the car. If you cancel the policy, the delar will just put the price of the car up by five hundred pounds.

But to answer your question about the value and need of the cover; yes, many claims have been settled satisfactorily. As with all insurances, they are open to abuse and fraud, but the premium reflects the risks the insurers takes when underwriting the policy in the first place.

Flyboy152

lostinheaven wrote: »

The type of policy you have is a combined Finance and Invoice GAP Insurance policy... these are becoming more common because Finance GAP Insurance alone, with it's depreciating nature (the balance outstanding on finance reduces over time and a time comes when the GAP Insurance policy will never provide any benefit), is unpopular, so having the best of both worlds is preferred.

In other ways, your post is VERY interesting. It is very unusual to have a Wear and Tear clause within the wordings of a GAP Insurance policy... an MBI (Warranty) policy for sure, but not a GAP Insurance policy... if the car has been written off by the motor insurer, wear and tear doesn't really come in to it.

The "wear and tear" condition is in respect of previous damage to the car, which causes its value to be less than that expected of a car in average condition. For example, if the car has been de-valued, by a bump in the door, by a thousand pounds, the GAP policy should not be expected to cover the shortfall of a previous accident. This exemption is quite common in most motor insurance policies.

loruok

I have just bought a 3 year old merc from a main dealer. The dealer said that if I paid the full purchase price (£16750), he would throw in GAP insurance + wheel and tyre insurance for free.

I agreed to this, but after I collected the car last week and studied the documentation, I saw that he had discounted the invoice cost of the car and separately added the cost for the 'free' extras (totalling £900). I was not really happy with this as it devalued the car. On reading the policy documents I found that I could cancel the policies within 14 days for a full refund.

I contacted the insurance company and arranged to cancel, and was told that the dealer would reimburse me direct. I then got a irate call from the dealer telling me that if he could not give me a full refund as he would be losing money on the deal. He said that we had agreed the deal and if I did not want the insurances, he would rewrite the sales invoice to show the original full invoice value of the car.

Can he do this? He did also admit that that the dealer did not actually pay the insurer the full amount as shown on the invoice as it included a commission, so maybe he might want to settle with me by paying a lesser amount. Should I agree to this?