Many motorists are unaware, but if you were to get into an accident and have the car written off (or if it was stolen and never recovered) then you would only receive the current market value from your insurer. Due to depreciation, which is often over 50% after three years, this could leave you significantly out of pocket and struggle to afford a replacement vehicle.
Fortunately, there is a good solution for this in the form of GAP insurance. GAP insurance is an optional insurance policy that will provide the shortfall between the insurance payout and the amount originally paid or the amount left on the finance agreement if the car is declared a total loss.
As an example, if you purchase a new car for £19,000 and it is then written off after three years, you would only receive £8,550 from your comprehensive car insurance provider (based on average depreciation rates). This would leave you £10,450 out of pocket without GAP insurance, so it is clear why it is a smart investment.
Do I Need It?
When discussing GAP insurance, many motorists will claim that they do not need it and that it would be a waste of money. While it is hoped that you never get into an accident and write the vehicle off, you would be surprised at how often this happens and it can happen even through no fault of your own. Not only this, but car theft is a huge problem in the UK and would result in the same issue without GAP insurance in place. Importantly, having a GAP insurance policy along with an extended warranty in place can provide peace of mind for motorists too.
What About for Businesses?
From a business standpoint, commercial vehicle GAP insurance is also a smart purchase that can protect your company in the event of a total loss. Businesses are often operating on fine margins, so losing thousands of pounds after an accident or theft could tip the scales and create an extremely challenging financial situation.
Additionally, commercial vehicles are often on the roads more than regular cars and can often be targeted by criminals, particularly builder’s vans that will have expensive equipment and materials. This means that these vehicles can be at higher risk of being written off, so having commercial vehicle GAP insurance in place is intelligent.
Although it is not required, GAP insurance is a smart form of insurance that should be considered by every type of motorist. It is a way to protect your investment and could end up saving you thousands of pounds if your vehicle is written off or stolen, plus it is helpful in terms of providing reassurance and peace of mind knowing that you are not at risk.