So you like the idea of gap insurance? After all, there are not many vehicles that will not suffer from significant depreciation over a period of time. A written off vehicle can present all kinds of financial headaches, even though you have fully comprehensive motor insurance. Remember your own motor insurance only pays the vehicle market value at the time it is written off. This can be thousands short of the original purchase price, or the amount required to pay off any finance, and then you have to find the means to replace the vehicle!
So we understand that Gap Insurance can help with this, but do you want finance gap, RTI Gap Insurance, VRI Gap Insurance, or even a combination of them all?
The first question is simple
What do you want to cover with Gap Insurance?
There are 3 basic options:
– the outstanding amount on finance – if you have a finance agreement on the vehicle you may owe more on the settlement than the vehicle is worth when it is written off. Without this type of cover you may be liable for the difference.
– the original invoice price you paid- that is the original price you paid, including deposit, part exchange and a financed amount.
– the cost of replacing the vehicle ‘like for like’ – if you want the same standard of vehicle again, even if the cost has risen since you purchased the original vehicle. Similar to ‘new for old’ cover on your home contents insurance.
You may need to cover one or more of these options, so it is important to consider exactly what type of gap insurance coverage you require.
So which type of Gap Insurance is right for you?
Firstly, lets look at finance gap insurance, and ask the only question that is required:
Could you ever owe more on the finance settlement than the vehcile is worth?
If the answer is yes, then some finance gap insurance coverage is worth considering. However, it is not always the case that if you have a finance agreement in place that you could benefit from finance gap insurance if the vehicle is written off.
Remember it is ONLY if you owe more on the finance settlement than the vehicle is worth when finance gap insurance can help. If you buy a vehicle, and only finance half the value you may never be in this situation
Return to Invoice, or RTI Gap Insurance, simply provides you with cover back to the price you paid for the vehicle. So if all you want is to cover this then this type of gap insurance could be perfect for you. This may be the case if you have paid cash for the vehicle, or even taken finance with a good size deposit. Even if you have paid a smaller deposit, and could owe more on the settlement at some point, than the original invoice price, it is possible to buy combined RTI Gap Insurance. This will give you cover for the higher amount of the invoice price, or the finance settlement at the time of the write off.
If you are looking to cover the potential replacement cost of the vehicle, then VRI Gap Insurance, or Vehicle Replacement Insurance may be right for you. This will cover the replacement cost of the equivalent vehicle to the one you took the policy out on, even if that is a higher price than you originally paid. So if you buy a brand new Ford Focus in 2011, and the equivalent model in 2013 is now more, it is the 2013 price you are covered to. Remember to give yourself the adequate claim limit for this!
So there you have it in a nutshell, once you know what it is you are trying to cover, the choice as to which Gap Insurance you require gets much more simple!