It is most common for a motorist to purchase a vehicle from the dealership and be introduced to Gap Insurance and offered to buy the type of cover for a price in the region of £399. However, with more and more people in the UK becoming both internet and price savvy, it is highly likely that you have decided to carry out further research into both the price and the type of cover.
You may have clicked on a number of quotations already and found that the price is a significant amount less than that offered at the dealership, this is down to a number of factors. You may have also found that you will have been quoted for more than one policy?
First of all, we must explain that the difference in price does not mean a compromise to the level of cover or quality of your policy. The difference in price is down to three main factors, the first being Insurance Premium Tax.
Insurance Premium Tax is a tax paid on all insurance, however, as the dealership is involved in the sale of the vehicle, they are charged at a rate of 20%. Online independent retailers, such as ourselves here at Shortfall, are only charged the standard rate of IPT, this is traditionally lower than VAT.
The next factor is supplier rates. An individual dealership will sell less policies than the online independent retailer, therefore, the supplier rate will be a lot lower for the online retailer than that within the dealership.
The last factor for you to consider is rates of commission. Each salesman will earn commission on the sale of a vehicle and on any supplementary products such as the Gap Insurance.
Market research has shown that dealerships most commonly offer only one type of Gap Insurance to their customers, however, there are a number of different types of Gap Insurance for you to consider.
Return to Invoice Gap Insurance is the most common form of Gap offered in dealerships in the UK. This form of Gap Insurance does exactly what it suggests, it will return you from the market value of your vehicle (I.e the motor insurance settlement) back up to the original invoice price that you paid.
Finance and Contract Hire Gap Insurance is the next form of Gap Insurance offered within dealerships in the UK. This form of Gap Insurance will pay from the market value (I.e the motor insurance settlement) and the amount of finance you have outstanding on the vehicle.
The last form of Gap Insurance is Vehicle Replacement Insurance. This form of Gap Insurance has only been recently developed and is yet to enter many dealerships in the UK.
Vehicle Replacement Insurance will pay the difference between the market value of your vehicle on the day it was written off (I.e your motor insurance settlement) and the amount it costs to replace the vehicle with the same make, model, specification, mileage and age of the vehicle you originally purchased.
If you have any further questions on Gap Insurance or any queries that have not been explained then why not give one of our customer service team a call on 0800 195 4926.