GAP INSURANCE has saved British drivers more than £300m on claims for cars less than five years old, according to the latest figures. In 2017, UK insurers wrote off a car every 90 seconds due to accidents and the average claim per new vehicle was in excess of £9,000.
Thanks to GAP Insurance, many motorists on leasing deals have avoided being out of pocket when making a claim, because their insurance only covers them for the current value of the vehicle. And theres even more reason to consider GAP, with experts warning many could even find themselves in negative equity if they dont get clued-up about the exact cover they need.
Damien Gallivan, head of Select Care, our designated insurance team said: Car Leasing has given thousands of motorists the opportunity to take to the road in a new car when perhaps it wouldnt have been possible before.
And while its great to drive a top-of-the-range vehicle, many need to realise being in an accident while doing so can put you at serious risk of owing the vehicle funder more than your insurance is willing to pay out. That is if you dont take out GAP [guaranteed asset protection] insurance when its needed.
As consumers, we often wave away much of the aftersales options because we dont think they are worthwhile. Its vital lease customers in particular are aware of the benefits of GAP Insurance. Though it is an extra cost, it will feel insignificant when you find yourself in an accident and end up owing more than the value of your car.
The risks are clear. Every year, more than 300,000 cars and vans are written off in Britain, and over 370,000 are stolen. We have the highest number of stolen cars per capita in Europe.
Damien added: It is especially important for those on lease deals, where youre only paying for the depreciation. In the event of total loss, you could be left with a massive discrepancy between what the finance company values your car at and what the insurer is willing to pay out.
Its the same with Personal Contract Purchase (PCP). If you have a finance agreement with a balloon payment a big lump sum due at the end of the contract your insurance might not cover the amount youre required to pay-off in the result of an accident. It is important all drivers get themselves well-acquainted with the type of insurance they require otherwise they could find themselves seriously out of pocket and unable to get back out on the road.
GAP insurance is advisable when there is the potential for a difference, or gap, between what the insurer will pay out anddepending on the policywhat was paid for the car, or what is still owed on a leasing deal. Without it, some motorists can find themselves losing out even when on fully-comprehensive insurance policies. This is due to depreciation and rapid loss of value sometimes as much as 60 per cent in three years, according to the AA.
Some policies will not offer a new-for-old car in certain circumstances, such as where the vehicle has been stolen or involved in an accident where the owner is at fault.
According to guidelines from the Money Advice Service: Depreciation means brand new cars lose their value very fast [If] your brand new car cost £12,000 and it was stolen or written off three years later, you only get its current value, £4,800, from your insurance company. This isnt enough to buy an equivalent brand-new car and unlikely to be enough to repay what you owe on your finance or lease deal.
GAP insurance will generally cover excesses up to £250 of a claim but tends not cover non-standard extras added after purchase, like speakers and satnav. There are three main types of GAP insurance:
- Lease GAP insurance in the event of a total loss claim, will cover up to 100% of the outstanding rental payments for the vehicle and any gap between the finance company value of the vehicle and the insurer value.
- Return-to-invoice insurance cover that tops up the payment from standard insurance to the value of the car when bought new or second-hand
- Vehicle replacement GAP insurance Similar to return-to-invoice, but designed to cover the rising cost of cars or temporary discounts. This is the most expensive option but carries the biggest payout
At Select Car Leasing, we also offer all our customers the choice of taking Select Protect insurance. This covers small scratches, scuffs and dents which have a negative effect on car value. The SMART repair technology avoids the need of visiting a conventional body shop and Select Protect picks up the cost for 24 or 36 months, up to a maximum of £3,000.