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If you were ever unfortunate to find that your car has been stolen or written off in an accident, your insurance company will only ever pay out based upon that value of your car at that time.

This, though, may well be less than the remaining figure that you still owe your loan company. Scenarios such as this have brought a type of insurance known as Guaranteed Asset Protection – or GAP insurance – into the market place.

A GAP Insurance policy will cover the outstanding figure between your car’s existing value and the amount you initially paid for it. Note, GAP Insurance is NOT an alternative to regular car insurance; you must still purchase that to legally drive. GAP will cover any shortfall that you have left to pay. It is definitely worth considering, in particular with new car purchases. Imagine the feeling of having to continue paying for a car that has been written off or stolen!

Gap insurance is also known as Return To Invoice or Return To Value. If you have been paying for your car for, say, two years and it is written off, you would lose the money you had already paid. GAP insurance pays the difference between the purchase price and what your insurers offer you. This means that you do not lose all that money which you have so far paid. Whether or not you choose to put the money towards a new car, it is reassuring to know that you will in fact have this option should your car be deemed a write off.

Most motorists are unaware that new car depreciation is one of the highest costs of motoring. From the second that you drive your new car off the forecourt it’s actual value is starting to go down. In this first year it can be by up to 50%. For an older car, this is less of an issue, but imagine if your new car was involved in a theft or accident in it’s first few months of ownership! You would be left massively out of pocket – hence the importance to look at offsetting this with GAP, Return To Value or Return To Invoice policies. As these are all different, make sure you do your research to see which one is best suited to you.

Generally speaking, gap insurance policies will span a term of about five years, covering a vehicle up to the value of 100,000 or so. There are companies who will provide like-for-like cover for your car, replacing it with the same model should it be written off or stolen. The name for this type of product is Vehicle Replacement Insurance- or VRI. The standard period between buying your car and being able to take out a VRI policy is usually three months. This applies not just to drivers who have bought a car with finance or under a hire purchase agreement but also to those who lease vehicles.

Though it’s a new policy, you should also be aware that compulsory FSA regulations apply to all companies who provide GAP cover.

ALA provide all types of GAP car insurance including GAP, VRI and Return To Invoice. Visit their website to find out more about GAP cover and why it is worth it.

Mar022011

Tags: car, car insurance, gap insurance, insurance, Trucks

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