All car owners are legally required to have some sort of car insurance unless their vehicle is registered with a Statutory Off-Road Notification (SORN). Although your comprehensive motor insurance policy will provide a great deal of protection for you and your car, it isn’t always robust enough to support you financially if your car is written off.
For this reason, car owners are advised to buy an additional cover known as guaranteed asset protection (GAP) insurance. GAP insurance is designed to protect you from a large financial loss if your car is declared a total loss by your motor insurance provider after it is stolen or irreversibly damaged after an accident, fire or storm.
In this guide, we look at the types of GAP insurance policies available for pre-reg vehicles and discuss whether this kind of cover is worth its cost for pre-reg vehicles.
Types of GAP insurance for pre-reg vehicles
Back to Invoice Plus
Back to Invoice Plus bridges the gap between the original invoice price of your pre-registered car and the amount your motor insurer would offer as a financial settlement for your claim in the event of total loss. It’s a good option if your primary concern is not losing money on your purchase.
Vehicle Replacement Plus
Suppose your car is stolen or irreparably damaged in an accident, but the settlement figure offered by your comprehensive insurer wouldn’t cover the cost of replacing it with a like-for-like pre-registered vehicle. In this case, Vehicle Replacement Plus GAP insurance will cover this difference or clear the outstanding finance amount.
This means that you are covered for the cost of replacing pre-registered car, even if it was more than you originally paid. For ‘nearly new’ or used cars, we would use the age of the vehicle in calculating the replacement cost.
Contract Hire Plus
If your lease or contract hire vehicle is stolen or involved in an accident and written off, this Contract Hire Plus will cover up to 100% of the outstanding rental payments. For added peace of mind, this policy will also cover any shortfall in the market value settlement provided by the motor insurer. This works in the same way for pre-registered vehicles as new cars because the age of the vehicle is not used in the policy calculation.
Benefits of GAP insurance for pre-reg vehicles
It can help you avoid paying a higher price for a replacement vehicle
A Vehicle Replacement Plus GAP policy would be beneficial for a pre-registered car because it allows you to replace your vehicle with a like-for-like pre-registered vehicle in the event yours is declared a total loss. This type of GAP insurance is worthwhile if you are concerned about the possibility of paying higher prices in the future if you choose to replace your vehicle with one of the same make and model.
It isn’t as expensive as you might think
Although the cost of a GAP policy can vary based on factors such as the original invoice price of the insured vehicle, the term and level of cover, and whether you include any additional covers, many people find that they can get this kind of insurance for around £20 per month over 10 months, or for less than £200 for a one-off annual payment.
Provides shortfall cover
GAP insurance is helpful if you’ve taken out a personal contract purchase (PCP) or leased a car and it’s been written off following an accident. The amount you owe on your lease, contract hire or PCP might be more than what the car is worth at the time it is written off by your motor insurer, so GAP insurance will help make up the shortfall.
Limitations of GAP insurance for pre-reg vehicles
It’s an optional coverage
This isn’t strictly a limitation, but something you should bear in mind. GAP insurance is not a legal requirement and will not always necessary, but it can be an excellent investment.
It doesn’t cover everything
For all that GAP insurance has to offer, it won’t cover everything. Things like service plans and delivery fees are not included, nor will it pay for damage beyond the car’s actual value.
It also doesn’t cover your car if it was written off while an unauthorised driver was behind the wheel (e.g., if you lend your car to a friend who is not on your insurance) or if the car is stolen due to negligence (such as if your car was unattended with the keys left in the ignition). Since GAP insurance generally only covers up to the vehicle’s original value, any additional money needed for deductible payments or excesses will have to come out of pocket.
Is GAP insurance worth it for pre-reg vehicles?
While buying a pre-reg car can be a great way to save money, depreciation rates could potentially throw a massive spanner in the works.
Pre-registered cars are classed as used or nearly new cars because they have seen a huge drop in value as a result of the vehicle dealer registering the new car to themselves before selling on to a customer. Sometimes the value of new cars can drop by thousands of pounds within just a few months. So, what happens if your pre-reg car gets written off or stolen soon after you start to use it?
Your insurance company would only pay out the current market value. In other words, you’ll lose out on the difference between the insurance pay-out and what you paid for the car. This is where GAP insurance can help.
However, it’s always good to compare your options and get a quote from a professional before you decide to take on a new policy or not.
Get touch with us today and talk to one of our friendly representatives about our GAP insurance plans for pre-registered vehicles. We’ll help you find the kind of coverage that works for you at a price you can afford.