GAP Insurance from Keith Michaels

What is GAP insurance?

GAP is short for Guaranteed Asset Protection. It’s an insurance that is designed to work alongside your existing insurance policy, and is particularly relevant when you purchase a new car. GAP insurance is designed to cover the difference between the amount you paid for your vehicle and the amount your car insurer would pay out if your car was stolen or written off.

How GAP insurance works

An example; you have just purchased a car for £20,000, and have taken out finance for £18,000. You have used the car for a few weeks and then it is stolen or written off in an accident. Your car insurer is prepared to give you a cheque for £16,000 yet you paid the dealer £20,000. The £16,000 is the insurer’s estimate of the cars value now. This leaves you with an immediate £4,000 difference which could get potentially higher should there be additional costs from your finance company for a car you no longer own.

An insurer’s settlement is based on the car’s value at the time of the total loss and unfortunately cars are notorious for depreciating quite quickly. Brand-new cars can potentially lose up to 60% of their value in their first three years. Because of this, GAP insurance is not suited to older or relatively inexpensive vehicles because their rate of depreciation will be lower.

Types of GAP insurance

There are a variety of types of GAP insurance which can cover amounts between the insurer’s settlement and what you paid for the car, or what you may still owe if the car is financed.

Should I get GAP Insurance?

GAP insurance could be for you if…

• there is a risk of you owing more than the car is worth
• the car you have purchased depreciates very quickly
• your finance was a high percentage of the car’s purchase price

Keith Michaels can help you find the most appropriate GAP policy for your circumstances so please call us on 0208 329 1150 or email [email protected]