Many motorists are unaware, but if you were to get into an accident and the vehicle were to be written-off then the payout from your insurer would only be the current market value of the vehicle and not the amount originally paid.
It is important to understand that this could see you lose thousands of pounds due to depreciation, which is as much as 35% after just one year of ownership.
GAP Insurance
So, what can you do to protect yourself from this? Fortunately, there is a smart solution to this in the form of GAP insurance. This is an optional insurance policy which will cover the shortfall between the amount paid out by your insurance company and the amount paid for the car or the amount outstanding on the finance agreement. This ensures that you get all of your money back, which you can then use towards a suitable replacement vehicle.
As an example, if you were to write a car off after three years of ownership and having paid £19,000, you would only get £8,550 covered by your comprehensive car insurance (based on average depreciation rates). GAP insurance would then provide the remaining £10,450 to cover the difference.
Do I need Cover?
It is clear that it is a good idea to have GAP insurance on a new car or one that is only a few years old, but what about an older car where the rate of depreciation is not as high? Even in this situation, you could still find yourself out of pocket after what is already a stressful situation so it is better to be safe than sorry.
Additionally, it is important to know that accidents occur frequently and you could have the car written off even if you are a great driver and the accident is not your fault. Not only this, but cars are written off if they are stolen or never recovered or damaged by fire, flooding, etc. so GAP insurance can provide complete protection.
Getting Covered
It is important to obtain a GAP insurance policy from a specialist so that you can benefit from flexible cover, fewer exclusions and the best rates. Additionally, you may also want to arrange an extended warranty from somewhere like ALA.
Many motorists are unfamiliar with GAP insurance and could be in for a nasty surprise in the result of a write-off. This is why it is a good idea to make sure that you have protection in place with a GAP insurance policy, which could end up saving you thousands.
