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4 min read
GAP Insurance is Guaranteed Asset Protection, but what does that actually mean and do you really need it? We’ve have created this handy guide to help you understand.
GAP insurance is an optional extra that sits as a standalone policy, separate from your standard car insurance.
It is designed to connect the gap between the amount you paid for your car and the amount your insurer would pay in the event of your car getting stolen or, if in an accident, is declared as a total loss.
Whether or not your car is bought brand new or second hand - as soon as you drive it away from the forecourt and within a year of driving it will decrease in price.
Just like anything we purchase, once gradual wear and tear builds up, the value will drop.
GAP Insurance exists because of car depreciation, which is the amount of the car’s value you have used up over time.
To understand whether or not you need (or would want) GAP Insurance, let’s look at the benefits…
A key advantage of where GAP insurance can come in handy is if you took out a loan to purchase a car.
Let’s look at a hypothetical situation:
If you purchased a car last year worth £8,000 and used finance or a leasing agreement to buy it and you are then involved in an accident where the car is declared as a total loss.
You then make a claim through your insurance provider, however your insurer will only offer the current market value of the car which over time has devalued to £4,000, this leaves you with a loss of £4,000.
GAP insurance takes care of this £4,000 loss so you will still be able to pay your loan and won’t be out of pocket. Essentially it will protect the financial interest in your vehicle.
Additional benefits are allowing you to change your vehicle without having to cancel your GAP policy, covers your excess up to £250 in the event of an at-fault claim and you can renew your policy annually so this can run in line with your car insurance policy.
It is completely optional to get GAP Insurance when purchasing a car.
However it is recommended to get it if you have taken out a loan to purchase the car as GAP insurance pays any amount owed to a finance company.
If you’d like to find out more about GAP insurance, our expert team will be happy to help. Get in touch on 08000 66 55 44 today.
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