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GAP Insurance policy conditions and regulations | Policyholder expectations and common problems

16 November 2023

Written by Simon England

|  5 Minutes

If you already have a policy with ALA, you’ll know we’re transparent about our policies and always give our customers the benefit of the doubt. As with any insurance, if you’re looking to buy a GAP insurance policy, it’s always a good idea to check who you’re trusting to protect your investment. It’s good practice to understand policyholder expectations and the possible challenges you might encounter.

This article covers our expectations of customers, including general obligations and ones specifically relating to GAP insurance claims. We also explore some common GAP insurance challenges that could cause you to lose coverage. Then we discuss GAP insurance regulation and its importance when choosing a provider.

Policy rules: what are your obligations as a policyholder?

With every insurance policy comes a set of terms and conditions. We ensure our customers are fully informed about their responsibilities during the policy term.

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General policyholder requirements

It’s important to notify us when your personal or vehicle details change. You can make changes on your My ALA account. Alternatively, phone our friendly team, who can help you keep everything up-to-date.

If we notice an issue with your payment information, we will get in touch using your given contact details. Your cover will remain in place while you update your payment details. You have 14 days to update us over the phone.

Policyholder requirements when making a claim

To stand the best chance at making a successful claim, you should follow our guidelines to help us reach a settlement.

  1. Take reasonable care to answer our questions correctly, accurately and to the best of your knowledge.
  2. Ensure you don’t take a settlement from your comprehensive car insurance company until we have liaised with them to reach a favourable settlement for you.
  3. Provide the correct documentation when starting your claim. We outline the required documents in our detailed guide.

What you should know about claim settlements

Some nuances to our claim-settling procedure are important to bear in mind. If you have a finance agreement which is not entirely covered by comprehensive car insurance, we contribute to clearing the remaining loan balance. We arrange this directly with your finance provider. You have the responsibility to cover any remaining finance such as negative equity. Additionally, you should contact us before accepting a car insurance settlement as this could affect your GAP insurance payout.

Common problems and denied claims

Paying for GAP insurance but failing to make a valid claim when needed will be devastating. Here we outline the most common reasons that can void a GAP insurance claim so you don’t make the same mistakes

  1. Your car insurer won’t pay out – GAP insurance is only available to top up your existing car insurance payout.
  2. You don’t provide the right documents – there are several documents you need , so make sure you know what these are and keep copies of them safe.
  3. You already have new-for-old cover – some insurance companies offer new-for-old cover for 12 months; if you get offered a new-for-old replacement after a total loss, you can’t make a GAP claim .

In very rare circumstances your payout may not be what you expected. For example, if you accept a settlement from your car insurance provider without consulting us, we may be unable to cover your entire shortfall. Also, if you have an agreed value car insurance policy, the settlement may be less than the vehicle’s market value . We can only cover the shortfall from the market value, and we cannot protect negative equity.

Who regulates GAP insurance policies

the Financial Conduct Authority (FCA) regulates all financial services in the UK. The Prudential Regulation Authority regulates all financial service firms. However, GAP policies have special regulations to ensure customers are well-informed about every policy. The FCA requires GAP insurers to abide by the following rules:

  1. The insurer must show the total premium separately from any other prices.
  2. The insurance company should clearly outline the policy benefits and exclusions with links to relevant documents.
  3. The insurer should outline the policy duration.
  4. The insurance company should explain that GAP coverage is optional.
  5. The insurer should record the date the customer received the above information.
  6. Some additional rules apply to GAP insurance providers at dealerships or who sell GAP insurance alongside another product.

  7. Insurance providers should make customers aware of independent GAP insurers.
  8. Dealerships cannot sell GAP insurance on the same day customers enter the dealership.

These rules can help you decide whether a GAP insurance policy and provider is fair. Particularly look for GAP insurance quotes with clearly outlined:

  • Prices – in full for lump sum payments or monthly instalments.
  • Contract length – any options should be clear.
  • Benefits and exclusions or links to such information
  • Links to relevant documents
  • Links to general GAP insurance information

Another way that customers are protected is with the Financial Services Compensation Scheme. If, for any reason the underwriter doesn’t have the funds to pay out, the Scheme will settle their behalf .

Make a GAP insurance quote today!

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