How to pick a Gap Insurance Claim Limit - Formula
A question that we are constantly asked is which gap insurance claim limit do you need?
This is not an easy question to answer the reason being that the gap insurance claim limit you will need will depend upon the type of cover that you want to buy and the length of cover.
This is because your gap insurance claim limit is the maximum amount that you will ever be able to claim from your gap insurance policy. no matter which level of cover you have chosen or how long so naturally picking the most appropriate claim limit is just as important as the level of cover itself. Don't forget that this is an amount on to of your own insurance companies settlement. This means that if you have chosen for example finance gap insurance the claim limit that you will need will be much smaller than for example vehicle replacement.
This is because your policy is protecting different aspects of your vehicle. Finance gap insurance is simply protecting any shortfall whereas vehicle replacement has to be the most generous of all claim limits as it hs to be big enough to protect not only your vehicles depreciation but also the appreciation of the cost of a replacement vehicle. So what is the magic claim limit formula? How can you make a real informed choice? Sorry there is no hard and fast guideline however common sense does help. For example if you are thinking of a return to invoice policy where your claim limit is simply responsible for topping up your own motor insurance companies valuation back up to the original invoice price you paid.
Motor industry experts say that the average vehicle will lose up to 50% within the first three years alone so thinking about how much you could lose while not being a nice thought is very important. Your car will lose continue to lose money over time. If there was any tip for picking a claim limit it would be that more is more.
On average increasing your gap insurance claim limit to the next level up is marginal in terms of cost.