There are a number of types of insurance available to you when you purchase a car. So many in fact you could easily end up paying more in premiums than you do in repayments. It is right to question and consider any insurance that is offered to you and decide if it’s right for you – if you are paying for your car on a monthly payment, then Gap insurance coverage is certainly something you should consider.
For example, let’s say you got into a wreck with a car you purchased two years ago, of course you have comprehensive and full collision coverage. Do you think you will receive money to cover the entire cost of the car? Not even close, if you didn’t know the value of vehicles drops considerably in the first few years after a vehicle comes out, within four years a vehicle will drop in value of up to seventy-five percent. So that twenty thousand pound car that you have been making payments on for the last 2 years is likely only worth around 12 thousand pounds now, which means now you have a difference that you are going to have to pay for out of your pocket.
It makes sense then, that the GAP in GAP Insurance refers to the covering the amount that is the difference between the actual value of the car and the residual value of the car at the time of an accident. Using the example above, the policy would be out the eight thousand pounds required.
The residual value issue can actually cause many car owners a huge headache unless they are fully covered. A large proportion of UK car owners find themselves out of pocket the minute they drive out of the forecourt as they will soon own more on the loan then the car is worth. This isn’t a small occurrence either, virtually every car on the market has a residual value which will drop dramatically in the first few years – therefore as well as shopping around for cars that hold theirs well, being aware of the importance of GAP insurance is imperative.
Finally, it should also be noted that it is a “must” that the Gap Insurance coverage begins when you buy your car and take out long term finance on it. Most policies will be based upon the value of the vehicle at the time it’s taken out – therefore if you wait a couple of months before getting covered, you may already have suffered some dropping residual value and still be faced with a large bill to foot in the event of an accident.
ALA Insurance Brokers supply probably the cheapest GAP Insurance online in the UK and up to 75 % cheaper than any dealer quotation.
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