Gap insurance 17 June 2022 at 1:55PM in Insurance & life assurance 11 replies 803 views

Sterlingtimes

I am taking delivery of a new car which I will share with my son. I will be the registered keeper. My son, who does the greater mileage, will insure the car and I will be a named driver.

If I arrange GAP insurance, should the GAP insurance be in my name or my son's name? If the GAP insurance is in my name, would that create an issue if it came to a claim? 

Alderbank

Who will be the owner of the car, i.e. who will actually be paying for it?

Sterlingtimes

Alderbank said:

Who will be the owner of the car, i.e. who will actually be paying for it?

Thank you. I am the father and registered keeper. I will be paying for the car monthly. My son drives the car more than I do and I wanted him to insure and build his NCD.

Alderbank

If the car is written off the comprehensive insurance pays the current value of the car. This amount will be less, often considerably less, than what is still owing on the car. As the payer, your problem will be that the lender will demand repayment of the amount owing but you have only received the current value.
Gap insurance is to pay this 'gap'. It is quite independent of the car's comprehensive insurance. Since you are doing all the the paying it is only you who would suffer this loss so it would make sense for you to pay for any gap insurance.

I don't think the premium is greatly affected by who actually takes out the policy but there is a big difference in premiums between different providers. Because profit margins are so high with gap insurance the car dealership will be keen for you to take their policy but you will get much better value by shopping around.

Sterlingtimes

Alderbank said:

If the car is written off the comprehensive insurance pays the current value of the car. This amount will be less, often considerably less, than what is still owing on the car. As the payer, your problem will be that the lender will demand repayment of the amount owing but you have only received the current value.
Gap insurance is to pay this 'gap'. It is quite independent of the car's comprehensive insurance. Since you are doing all the the paying it is only you who would suffer this loss so it would make sense for you to pay for any gap insurance.

I don't think the premium is greatly affected by who actually takes out the policy but there is a big difference in premiums between different providers. Because profit margins are so high with gap insurance the car dealership will be keen for you to take their policy but you will get much better value by shopping around.

Thank you. It is very kind of your to address my question. I have paid for dealer gaps insurance in the past including once to a gap insurer that went bust. In fact, over the years three of my gap insurers have become bankrupt. I still think it is worth proceeding and I will follow your direction.

Sandtree

Sterlingtimes said:

Alderbank said:

If the car is written off the comprehensive insurance pays the current value of the car. This amount will be less, often considerably less, than what is still owing on the car. As the payer, your problem will be that the lender will demand repayment of the amount owing but you have only received the current value.
Gap insurance is to pay this 'gap'. It is quite independent of the car's comprehensive insurance. Since you are doing all the the paying it is only you who would suffer this loss so it would make sense for you to pay for any gap insurance.

I don't think the premium is greatly affected by who actually takes out the policy but there is a big difference in premiums between different providers. Because profit margins are so high with gap insurance the car dealership will be keen for you to take their policy but you will get much better value by shopping around.

Thank you. It is very kind of your to address my question. I have paid for dealer gaps insurance in the past including once to a gap insurer that went bust. In fact, over the years three of my gap insurers have become bankrupt. I still think it is worth proceeding and I will follow your direction.

Would be interested to know who all these failed insurers were as it is fairly rare for any EU based insurer to fail and in particular UK based ones. Most of those listed under "insurance" on the FSCS website are intermediaries not insurers and so causes headaches but doesn't lose the policy. The FSCS cover would have continued on 90% of your claim basis or the policy would have been replaced by them with another provider.

Sterlingtimes

I am trying to find the historic information in my archives. One was related to gap insurance sold to me by a Vauxhall dealer possibly Alpha Insurance. But most recently, Warranty Direct provided gap insurance underwritten by Lamp. See here for background:

LAMP Insurance Company Limited (LAMP) has entered into liquidation | FCA

Sterlingtimes

I cannot find the correspondence related to the earlier gap insurances. I also suffered from the liquidation of the house insurer Independent Insurance where I did lose money. These fallouts do occur. 

Sandtree

Sterlingtimes said:

I am trying to find the historic information in my archives. One was related to gap insurance sold to me by a Vauxhall dealer possibly Alpha Insurance. But most recently, Warranty Direct provided gap insurance underwritten by Lamp. See here for background:

LAMP Insurance Company Limited (LAMP) has entered into liquidation | FCA

LAMP were not UK or EU but a Gib based outfit... there are reasons why companies choose to be based in an overseas territory with a total population about equal to the employee count of some UK based insurers. At least Bermuda focuses on reinsurance so no direct consumer contracts.

Sterlingtimes

Sandtree said:

Sterlingtimes said:

I am trying to find the historic information in my archives. One was related to gap insurance sold to me by a Vauxhall dealer possibly Alpha Insurance. But most recently, Warranty Direct provided gap insurance underwritten by Lamp. See here for background:

LAMP Insurance Company Limited (LAMP) has entered into liquidation | FCA

LAMP were not UK or EU but a Gib based outfit... there are reasons why companies choose to be based in an overseas territory with a total population about equal to the employee count of some UK based insurers. At least Bermuda focuses on reinsurance so no direct consumer contracts.

Thank you. So really I should be taking care to examine the nature of the underwriter before choosing my gap insurer.

Sandtree

Sterlingtimes said:

Sandtree said:

Sterlingtimes said:

I am trying to find the historic information in my archives. One was related to gap insurance sold to me by a Vauxhall dealer possibly Alpha Insurance. But most recently, Warranty Direct provided gap insurance underwritten by Lamp. See here for background:

LAMP Insurance Company Limited (LAMP) has entered into liquidation | FCA

LAMP were not UK or EU but a Gib based outfit... there are reasons why companies choose to be based in an overseas territory with a total population about equal to the employee count of some UK based insurers. At least Bermuda focuses on reinsurance so no direct consumer contracts.

Thank you. So really I should be taking care to examine the nature of the underwriter before choosing my gap insurer.

Goes beyond just gap insurance, plenty of Motor and Home outfits are based out there (and indeed one of the large motorcycle insurers was until it went bust earlier this year). 

Its the same as anything though... you have FSCS protection, it almost certainly will be cheaper having a lighter regulatory regime but it increases the risk of having to deal with the faff of FSCS.