As with paint protection and fabric protection, another product that new and used car salespeople will often attempt to sell, is Gap insurance, or the less sexily named ‘Return to Invoice’ cover. You’ll not have much time to consider it, and a torrent of its features and benefits will doubtlessly stream from the mouth of the salesperson, when your mind is on the great new car you’re just signing up for. So be forewarned of what Gap insurance is all about, and remember that the Financial Conduct Authority has decreed that garages must not attempt to sell you Gap insurance until two clear days have passed from when you have signed on the dotted line. Or in other words, from day four after buying your car, you’re fair game. With a new car, or a used one that is new to you, you won’t want major incidents to ruin your ownership of it, like a write-off accident. But if it happens, Gap insurance is one of the best ways to avoid significant financial loss if you and your car are the victims of such misfortune.
Firstly, the “market value” settlement that most insurers use will not buy you the same standard of vehicle as yours was when you first bought it. Any settlement may also not be enough to clear the financial liability of a PCP contract, or any HP agreement. Most good insurers do offer conditional “replacement with new” cover for cars under one year old, but only if the repair cost is over 60 per cent of the cost of the car brand new, and there may be mileage limits. It can end up with disputes on costs of repair, and insurers may insist on supplying a replacement car, rather than cash, when maybe you don’t want the same car again.
Gap Insurance sets out to cover those situations, and insurers can offer a choice of cover, for any of three or four different scenarios. A Combined Total Loss Gap Insurance policy, such as that offered by the highly rated c company covers them all, and pays out if any of a number of things happen. It can apply to any new car, or used vehicle that you purchase.
• It will pay out the amount outstanding on any finance, which in some circumstances can easily be more than the value of the car, with interest charges and value depreciation.
• It will pay out the value of the original invoice for the car, obviously with proof of purchase.
• It will pay you the cost to replace a damaged car with another vehicle identical to the one written off, at the time of its purchase. Or it will pay out the value of the equivalent model, if your car model has by then been superseded.
• It will pay out the best or highest figure of any of those circumstances.
Not all Gap insurance will necessarily cover all those variations though, so you need to know what is applicable to your situation. But you will get a better deal if you buy Gap insurance independently, and not from the supplying dealer, so it is best if you do your own research. What sort of cost is involved? We found a comprehensive quote for a £20,000 new car, on PCP finance over four years, covering all those risk variations from Total Loss Gap specialist insurer, for a one-off payment of £228. That’s £57 a year for four years of comprehensive cover and is not unreasonable for such peace of mind. It’s not a lot to guarantee that you don’t end up with financial worries on top of the considerable stress of a write-off accident.
But you do need to take note that there’s nothing Gap insurance can do between the accident and the official decision of your insurance company that the car is a total loss write-off. That can sometimes take weeks, so you may need cover for the costs of a hire car until you are informed of that decision. Check your policy for that, and don’t let any accident managers divert you from dealing direct with your insurers. But, whilst Gap insurers can do nothing until they have that official write-off decision, a contact at Total Loss Gap said they usually then pay out within 10 days.