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What is a Shortfall Gap Insurance Claim Limit?
A claim limit is the maximum amount you can claim from your Gap Insurance policy. It is chosen by you when taking out your policy. In other words, the claim limit is the maximum sum you can claim from your Gap Insurance. If you choose £5,000, that is the maximum you can claim, the most your Gap Insurance provider will pay you. However many drivers find it a daunting task when deciding what claim limit to choose. This is mostly because there is on average a £40 difference between the lowest limit, £5,000 to the highest £25,000. Given that drivers are taking out Gap Insurance with the hope of never having to use it (just like all forms of insurance), drivers choose the cheapest limit. Drivers are simply unaware of the importance of the claim limit. Paying the extra £40 for a higher claim limit could possibly save you paying £10,000 in the future.
Please see the following illustration:
- Michelle purchases a Renault Clio for £10,000
- Michelle takes out Return to Invoice Gap Insurance
- Michelle decides on a £5,000 claim limit
- Three years down the line, Michelle’s Clio is stolen
- Michelle contacts her comprehensive insurance provider who inform her they will pay her £5,000 as this was the market value of the Clio at the time it was written off
- Michelle in theory has a £5,000 gap, or short fall, or a loss, however you want to call it
- Michelle receives the outstanding £5,000 from her Gap Insurance provider as she had a claim limit of £5,000.
Please see the following illustration:
- Tom purchases a Ford Focus for £15,000
- Tom takes out Return to Invoice Gap Insurance
- Tom decides on a £5,000 claim limit
- Three years down the line, Tom’s Focus is stolen
- Tom contacts his comprehensive insurance provider who inform her they will pay him £7,500 as this was the market value of the Focus at the time it was written off
- Tom in theory has a £7,500 gap, or short fall, or a loss, however you want to call it
- Tom however only receives £5,000 from his Gap Insurance provider as he only had a claim limit of £5,000
- Therefore Tom still has a £2,500 loss.