Guaranteed Asset Protection (GAP) insurance is a supplementary insurance product for your vehicle aimed primarily at people with a new car, but those with older cars may be eligible too. Essentially, there is an ever-present risk that your new car can be stolen or written off soon after your purchase and your car insurance will not pay out enough to match the original purchase price.
GAP insurance pays out the difference between what your car insurance premium pays out and the full amount you paid or owe on a car finance agreement. This can be valuable protection to have in place in the event that your new vehicle is stolen or written off.
However, it is important to understand that there are some restrictions to GAP insurance, including caps and eligibility criteria. In this article, we will discuss these restrictions to help you assess whether GAP insurance is something you could benefit from.
Are there claim limits on GAP insurance policies?
A GAP insurance policy sometimes comes with a claim limit. This is the maximum amount that the policy will pay if you need to make a claim. No one can ever be sure precisely how much will be needed as the current market value of your vehicle at a set point in the future can never be determined ahead of time.
Insurance experts study markets to make predictions about the future market value of vehicles based on a number of factors. If the claim limit you select is too high, you could be charged more than you need for your policy, but if the claim limit is too low then you may not get the settlement you need to cover your total loss. Some policies set the cap at 105-110% to protect from certain circumstances. For example, if the customer has significantly overpaid for their car.
At ALA, we want all our customers to have the appropriate amount of GAP cover, without the grey areas or guesswork. To find out how much you could be paying for GAP insurance cover, you can retrieve a free quote using our “Quote Me” calculator.
Are there caps on GAP insurance policies?
GAP policies that are capped often offer a maximum settlement of 105-110%, as previously mentioned. This is in relation to the Glass’s Guide retail price. Expensive cars are often bought for more than the Glass’s Guide value of the car, often because the model is coveted.
ALA policies do not have that maximum level of cover, so they are perfect for more expensive vehicles. Our Back to Invoice Plus and Vehicle Replacement policies covers any vehicle worth up to £150,000, but the car must be less than four months old or less than 1500 miles. The policy must also be bought within 60 days of you getting the car.
Vehicle Replacement policies will cover cars worth up to £125,000 if the car is less than seven years old with less than 80,000 miles, but the policy must be bought within 90 days. For Back to Invoice Plus, cars worth up to £125,000 are covered if the car is up to 10 years old and there is no mileage limit. You also have 180 days to buy the policy.
Contract Hire policies cover any vehicle worth up to £125,000 in market value. Our policies are tailored to suit a range of vehicles, and we even offer RAC car warranty in the unfortunate event of an unexpected breakdown.
Are there any risks involved with GAP insurance?
It is important to be aware that there are some risks involved with GAP insurance cover. This is why it is crucial to consider your decision carefully and always go with a trusted provider.
There are some scenarios where a GAP insurer may not pay out. A common occurrence is when your main insurer chooses not to pay out. Without the initial settlement, a GAP insurer cannot pay out either. You can also render your policy invalid by not complying with certain conditions, such as using your insured vehicle for certain commercial activities.
There are several other scenarios where GAP insurance cover may not pay out, but the key is to understand the agreements in your policy right from the start. ALA will always work to ensure you understand how our policies work and help you choose the right policy to avoid not getting a settlement if you need one. If you need to make a GAP insurance claim, you can visit us here.
There are also some things not covered by a GAP insurance policy. GAP insurance does not cover car payments when you encounter financial hardship. It also won’t cover repairs, losses incurred as a result of repossession, the diminished value of the car after an accident or the cost of a rental car while your main vehicle is being repaired. There are other factors that a GAP insurance policy does not cover, which you can read more about in our previous guide.
As the policyholder, you have certain obligations that you must meet. These vary depending on the policy you take, so always take the time to read your policy and understand what is required of you. We can help if you have any questions regarding your policy or the various GAP insurance options that appeal to you. Get in contact with us today for more information.
Frequently asked questions
When should you consider GAP insurance cover?
GAP insurance is worth considering if you want a brand-new car because it can ensure you don’t end up out of pocket in the event that it is stolen or written off. It is also worth considering if you have bought a vehicle on finance as a means of ensuring you can pay off the outstanding finance balance.
If you lease your vehicle, you can opt for Contract Hire Plus insurance. This will cover up to 100% of the outstanding lease payments, and you can even protect the initial rental that you made at the start of your lease agreement.
When might GAP insurance be unnecessary?
If you would be happy to buy a used vehicle, GAP insurance may not be necessary. If you have fully comprehensive car insurance on a car that is less than 12 months old, GAP insurance also may not be necessary, though you may want to consider it further down the line, but beware of time limits to buy . However, GAP insurance policies are not just reserved for new cars, as older models could still benefit.
What should I look for when choosing GAP coverage?
There are various things to consider. First, you need to explore the different types of policies and decide which is right for your needs. You then need to look at the fine print and assess things like claim limits and caps on the value of the vehicle that can be covered. You should also consider the length of cover you will need. ALA Insurance can assist you in considering all avenues and will give honest, impartial advice to help you make the most suitable decision for your circumstances.