All you need to know about GAP insurance
What is Gap Insurance?
The way we purchase vehicles has changed considerably over the past ten years. With the prices of new vehicles increasing the vast majority of new car sales are bought/leased with several different methods of credit from the motor dealer. Conventional motor insurance does not afford enough protection to consumers or companies who use one of the new funding methods to acquire their vehicles - following a fault accident your motor insurance settles the depreciated value, not the amount you originally paid or any charges to close the lease agreement. From the second you start driving your vehicle it's depreciating, and although you may have a good driving history this does not mean you may not be involved in an accident where a third party is to blame. Another worrying statistic is that a vehicle is stolen every minute of the day in the UK and over 500,000 vehicles become a total loss each year. Unfortunately the customer pays the deprecation, not their motor insurer.
As stated earlier, there are many different ways to finance the purchase of new vehicles:
GAP Insurance for Contract Hire: A popular choice for VAT registered companies that want a minimum outlay and maximum control of costs. The user effectively pays just for the use of the vehicle.
GAP Insurance for Personal Contract Hire: This is a hire agreement but the rentals include VAT. Popular with Company car drivers who are given a ‘Car or Mileage Allowance’, instead of a company vehicle. Avoids ‘Benefit in Kind’ taxation.
GAP Insurance for Finance Lease: Ideal for VAT registered companies who want to handle the administration of their vehicles and have the asset shown on their balance sheet. Companies can pay the entire cost of the vehicle over the agreed lease period or pay lower monthly rentals with a final payment based upon anticipated resale value.
GAP Insurance for Contract Purchase: For companies who would like the option to purchase the vehicles but don't want any depreciation risks. The funder determines the future value of the vehicle at the beginning of the contract. This end value forms the balloon payment.
GAP Insurance for Personal Contract Purchase: Same as Contract Purchase but designed for private individuals. Has the benefit of no risk to residual value and allows customers to enjoy a low monthly payment so can afford a more expensive vehicle.
GAP Insurance for Hire Purchase: Traditional Funding method for businesses and individuals. The customer pays the full cost of the vehicle plus interest over the term of the agreement. Vehicle becomes the property of the customers upon final payment.
Of course, any of these funding methods can leave you with a shortfall following an accident. GAP insurance is designed to protect customers against a Financial Shortfall in the event their vehicle is written off. Write offs or Total Losses are defined as vehicles that are damaged beyond economical repair as a result of an Accident, Accidental Damage, Fire or Theft. GAP Insurance will protect the shortfall between the insurer’s settlement figure and the original cost of the vehicle to an agreed maximum benefit or the shortfall between the insurer’s settlement figure and the balance outstanding to the finance or lease company.
If you would like a GAP Insurance quote then please call Staveley Head and our specialist account handlers will be happy to discuss your requirements and supply you with the most appropriate policy at the lowest premium available. Alternatively you can get an online GAP insurance quote from our website.