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Car buyers unaware of GAP insurance

If you’ve ever had a car written off by an insurer then you’ll likely be aware of the way a payout is made – you’ll be given ‘market value,’ which doesn’t take into account any outstanding finance payments, nor will it put you back in the same financial position you were in before the accident.

For example, if you owe £5000 in car finance and your car is written off, the insurer might decide the market value is £3500, leaving you with a nasty £1500 bill to pay off the finance on a car you no longer own. The solution is an extra ‘GAP’ insurance policy, which would cover that £1500.

However, according to a poll of 2055 adults by YouGov and insurance provider ALA, just 2% of buyers shopped around for GAP insurance and only around half of them knew what it was at all – but it’s worth having a look if you’re buying on finance.

Chances are a dealer will offer a GAP insurance policy when buying, but, much like with other insurance policies, it pays to shop around. According to ALA, shopping around online can save you as much as 75% off dealer prices, and policies start from around £75 for three years. 

GAP insurance can cover other things, too depending on the policy you choose, and some will even replace your vehicle new-for-old if it's written off. There are also packages that return you to the financial position you were in at the point puchase, and cover for contract hire customers. 

You can read our FAQs on insurance by clicking here. 

Comments

barnesb29    on 24 September 2012

Buy outright so no wonder I don't know what it is!

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