Gap Insurance Explained
So what is Gap Insurance?
There are lots of information on the internet about what gap insurance is and how it works but it can seem a little confusing. Especially if you have bought your vehicle like most of us today on a form of finance. After all surely vehicle replacement gap insurance will not simply just buy you a new vehicle will? What happens if to you finance when your vehicle is written off? Who pays what?
Gap insurance is an insurance that runs along side your own insurance company and only ever comes into force if your vehicle is written off. This could be if it has been stolen or damaged in an accident. no matter what the circumstances your insurance company will ultimately decide if and when to declare your vehicle a write off. Once this happens your gap insurance policy can come into force. Your own insurance company we know will offer you an amount for your vehicle. This is often called a settlement and in theory this should be the amount that you need to spend to be able to but another vehicle the same age mileage and condition as yours was on the day it was written off. For example a 10-year-old Volkswagen Golf with 98,000 miles on the clock could be valued in the region of £2000-£3000. Gap insurance is designed to make sure that if your vehicle is written off that you do not end up being out-of-pocket.
Don't forget that without any form of protection the amount that your own insurance company offer you is the only amount that you have to clear and finance or replace your vehicle. So what happens now? If you bought your vehicle on finance then your insurance company is legally bound to ask you to obtain a settlement figure from your finance company. What ever this amount is your insurance company will send the amount that you agreed as total settlement for your vehicle directly to your finance company. If your car was worth more than the settlement then any remaining funds are then sent to you. If your car was worth less than your finance companies settlement then you are still legally responsible for any shortfall. Gap insurance can help as depending upon the cover that yu chose you can protect either just the financial shortfall, the original invoice price you paid or even the replacement cost. Yes Gap insurance is just like any other insurance it is your choice and there is no legal requirement to cover yourself.