There is a dangerous misconception amongst motorists in relation to comprehensive insurance policies that people need to be aware of. This is that if the automobile were to be written off, the insurer would only pay out the current market value for the vehicle as opposed to the amount paid. Due to depreciation, this can be a significant amount less and leave the motorist carless and out of pocket.
Significant Shortfall
A new car can lose as much as 70% of its value in just the first three years, so this could leave you short thousands of pounds and especially if you invest in an expensive car. Additionally, a used car can lose as much as 20% in just 6 months, so there is a huge financial impact no matter the automobile. As an example, if you purchased a car for £18,000 and then were involved in an accident where it was written off 3 years later, your comprehensive insurance policy would pay just £8,100. This leaves a £9,900 shortfall. So, how can you go about protecting your investment?
GAP Insurance
GAP Insurance is an optional type of insurance which covers the shortfall between the insurance payout and the amount that you paid for the car. This ensures that you can afford to replace the car or pay off the remaining amount if the car was purchased on finance. Essentially, this type of insurance neutralises the risk of depreciation and can be a smart purchase that could save you thousands.
Is It Worth It?
Many motorists believe that GAP Insurance is not worth paying for because they will never write their car off, but accidents occur far too often and it could even be an incident that is not your fault. Additionally, automobiles which are stolen and never recovered are declared a write-off, so you are protected in this scenario too.
Where to Buy From
GAP Insurance is sold by car salesmen, but for the best prices and level of cover, it is best to use a specialist provider as they will pay out the total shortfall so that you are not left out of pocket. This will provide peace of mind and the protection that you need should you have to make a claim.
Many believe that their comprehensive motor insurance will cover them if their vehicle is written off, but this is not true as they will only pay the current market value. Avoid a significant financial hit and avoid paying out your own pocket with GAP Insurance.