With 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.
Usually 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 Transfer
Pro 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.
Shortfall 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.
A 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
If something is underwritten then liability is signed for and accepted, guaranteeing payment if damage or total loss occurs. With ALA GAP Insurance, policies are underwritten by UK General Insurance Limited, for example, which means they accept the liability, within the terms and conditions, for every GAP insurance policy purchased with ALA.