Gap Insurance is like any form of insurance, it has terms and conditions. The more synical amongst you may call them ‘get out clauses’ , but essentially they would perform the same function. They form the boundaries within you policy may act for you. When buying a vehicle and looking at Gap Insurance to protect you, there are aspects to consider.
So what ‘loopholes’ should you look out for, and is there an easy way of finding them?
Gap Insurance features
Gap Insurance policies, although providing essentially the same cover, may have slightly different features in its terms and conditions, and it is these ‘terms and conditions’ that you should only concern yourself with.
Here is the point we are driving at:
If the feature you have been promised, or you believe to be valid, is not in the policy terms and conditions, DO NOT COUNT ON IT EVER BEING IMPLEMENTED IN A CLAIM!
Your insurance broker or car dealer may have said that a certain aspect is true, but if your insurance policy says otherwise, do not be too suprised if you end up disappointed.
Lets look at a very common example, and consider this statement often used to describe Return to Invoice Gap Insurance:
Gap Insurance will pay between your insurers settlement and the original invoice price you paid.
Sound about right? RTI Gap just covers the difference back to the price you paid? Actually most Gap Insurance policies state something slightly different in the policy, something along the lines of:
The policy will pay between the market value of the vehicle and the original invoice price you paid.
The underwriters liability will not be increased should you fail to gain full indemnity under the terms of your motor insurance.
Now market value is normally defined by the Glass’ Guide Retail Price of the vehicle, which most motor insurers will use. Most Motor Insurance policies will ‘indemnify’ you to the ‘market value’ of the vehicle. So if you have one or both clauses in your Gap Policy, and you do not receive the full market value of your vehicle, then the Gap Insurance policy may just pay from the market value to the original price you paid.
This will leave you with a shortfall, which is often blamed on the Gap Policy, but in reality is created by your motor insurer not doing their part. However, wherever the blame lies, it still leaves you with less money than you thought you had protected.
My Car dealer said I was covered with Gap Insurance?
And here is the point, they may well be right! If they have said that something is ‘free’ or is ‘covered’ , even if it is not written in the policy terms and conditions, the underwriters may still pay it regardless.
However, consider if the ‘retailer’ went out of business. The policy will still be valid as it is the underwriters who make the payout, but what happens if you say that the ‘retailer said this’ and its not written in the policy terms?
What do you think may happen?
Bottom line, if you are looking for potential ‘loopholes’ then read the policy terms and conditions. If it is not there in black and white, then simply do not count on it!
Gap Insurance is like any other insurance and it has terms to adhere to.