GAP Insurance Jargon Buster: Key Words and Phrases Explained
10 October 2017
Insurance shouldn’t be a complicated matter but for many new and existing drivers the terminology used can get a little confusing and off-putting.Who’d want to invest in something when they don’t fully know or understand what it is? With GAP insurance this can happen when many technical and unfamiliar terms are used. While we try to speak and write in the most understandable way, there is still a lot of terminology and jargon used when GAP insurance is explained. This jargon buster helps get GAP insurance explained in everyday language along with other common words and phrases.
Comprehensive Car InsuranceAlso referred to as fully comp cover, comprehensive car insurance is the highest level of insurance. This covers damage to your car that could be deemed your fault, that’s not the result of a collision, as well as damage to other vehicles. This provides more protection than third party insurance, which only covers damage to other vehicles and not your own.
GAP InsuranceWhat does GAP insurance cover? Well, when you buy a vehicle, it will start to depreciate (fall) in value. Should your car be written off or stolen then your insurer will pay out the amount your car is worth at that time. If you’ve owned the same car for a few years, this will be far less than what you originally paid for it. ALA GAP Insurance covers the shortfall, the amount lost between what you initially paid for it and the insurance pay out.
Outstanding FinanceWith a GAP insurance policy, it can cover vehicles which are purchased either outright or on finance, or leased. When leasing a vehicle, outstanding finance refers to the amount left to pay on your contract. For example, if you have a three year lease but your car is written off after only two years, this covers the costs of the remaining year. With vehicles bought on finance, your insurer might not pay you enough to clear the outstanding balance. The BTI or VRI GAP insurance pays the difference up to the invoice price or replacement vehicle cost (depending upon which policy you choose). This makes sure that the finance can be cleared and any amount remaining can be used as a deposit on your next car.
PremiumUsually used in the term ‘GAP insurance premium’, this refers to the amount paid for GAP insurance. Premium is essentially another word for cost or sum, detailing the exact amount GAP insurance will cost for your car.
Pro Rata TransferPro rata means proportional. Therefore, a pro rata transfer refers to a proportional amount being transferred. If you have taken out GAP insurance and changed your car before the cover has ended, a pro rata transfer refers to the amount of unused premium left. This can either be sent to your bank account or transferred over to go towards the GAP insurance premium for your new car.
ShortfallShortfall is the difference in value that a vehicle has lost between its point of purchase and the time it makes an insurance claim. This amount is what is covered by GAP insurance and any pay outs, should a vehicle be written off. The amount will vary depending on the vehicle, the time and other factors.
Total LossA total loss is the judgement by an insurer that the repair costs or lost value admitted to a car exceed the value of its policy. This means that the full value of the car at the time of it being classified as a total loss will be paid out. There are many things that can result in a total loss:
- Stolen vehicle
- Car crash
- Fire damage