Doing some homework on the purchase of a new car is easy enough, and can save you plenty of time and money in the long run. However, the additional products like warranty, tyre insurance, paint and fabric treatments and, of course, Gap Insurance are not areas that consumers spend enough time considering. If you spend just a little time on this you could save yourself hundreds of pounds.
So to help you along with Gap Insurance (something we hopefully know a thing or two about) we have complied our top five tips on how to save yourself money with Gap Insurance, without compromising on your cover.
Top 5 Gap Insurance buying tips
1 – Do not buy Gap Insurance from your motor dealer – motor dealers have traditionally been the biggest sellers of Gap Insurance in the UK, however with the advent of the FCA report in March 2014, it is likely to be the case that consumers will get easier access to compare other avenues for buying Gap Insurance. So why is is not necessarily wise to buy from your dealer?
Well firstly many products from motor dealers can be quite basic in terms of features. For example it is rare that a motor dealer product will allow you to transfer your cover if you change the vehicle early (which we will discuss further), or cover the cost of accessories like Paint and Fabric Protection cover.
The other issue is the cost. The typical 3 year Return to Invoice policy at a motor dealer is around £399, whereas if you buy independently then it would be less than £100 in many cases. That is quite a difference. You motor dealer may not explain that you pay an extra 14% Insurance Premium Tax when you buy from the dealer, whereas you only pay the standard 6% when you buy independently.
Of course this is not to say that all online products are better than the dealers, many showroom products may be around the same in terms of features. However, you are unlikely to find any motor dealer being able to offer your a Gap Insurance at anywhere near the premiums you will find from one of the prominent independent names in the market.
2 – Got a new car? Check if you can defer for a year – now this is not for everyone, but if you are buying a new car then some motor insurers (not all) may have new car replacement in their terms for the first year. This means that if the vehicle becomes a ‘total loss’ in the first twelve months then they will replace it anyway. If they did this then you could not make a claim on your Gap Insurance in that period. If (and we urge you to check the motor insurers terms) you have this in place then with many of the better online brands you can opt to defer that start date of your Gap Insurance until the vehicle is one year old.
So if you wanted to cover yourself for five years, then you could opt for a four year Gap policy with a deferred start date. There should be quite a nice saving for you in doing so.
3 – Check you can transfer your Gap – Already highlighted above, if you change your vehicle earlier than the end of the policy term then some Gap Insurance products will allow you to transfer the cover over to the new vehicle. Now there are actually two ways this may be offered. Some products will allow you to transfer the balance of the current policy term and conditions to another vehicle. However you probably will not be able to extend this terms further. The alternative is that some providers have the ability to give you a discount equal to the value left on the current policy against the cost of a new one.
There are pro’s and con’s with each option really. If you opt with the first one then this can be done with the insurer, and so is an underwritten term allowing you to transfer the original terms and conditions. Of course the second option relies on the retailer (not the insurer) still to be able to provide another Gap Insurance policy for you. Also the terms and conditions of the cover may have changed, and you may only have the newer terms (which may be more or less favorable) to go with on the new vehicle.
The good news is that there are some Gap Insurance products that allow you the choice of both methods of ‘transfer’, leaving you to decide which is the best option at that time.
4 – Cancellation rights – all Gap Insurance products should be fully ‘cancellable’ for you. However not all may provide a refund. Most these days will offer a pro rata refund of unused premium, less a cancellation fee, but do not assume this. If the policy you buy does not offer you a refund then you could have wasted your money for the period you may not be able to use, or claim back.
5 – Choose the right cover – this may seem obvious, perhaps even an odd statement, of you buy gap insurance from your motor dealer. This is because they often only have one Gap product to offer, being a three year Return to Invoice policy. However, there are alternatives in the open market.
For example let us say you buy a brand new vehicle for £20,000, that has had a great discount of £5,000 applied to it. Return to Invoice Gap can only ever cover you to the £20,000 you paid, but this may not be anywhere near enough to get a brand new replacement again. However, if you had take a Vehicle Replacement Policy that covered you to the full replacement cost at the time of your claim, of the new replacement vehicle is now £26,00o then this is the figure you can be covered to. The cost difference between Return to Invoice and Vehicle Replacement can be marginal, yet could see a substantial difference in settlement if you had to make a claim.
Do not assume the ‘one size fits all’ approach with Gap Insurance will give you the best value, you could be very disappointed!
So there we go, our Top 5 Tips on getting the very best value from your Gap Insurance in the UK.