The used car market is booming, as a result of a global chip shortage leading to a downturn in new car production. With new drivers on the rise in the aftermath of the coronavirus lockdowns, more and more motorists are hitting UK roads without fully understanding the options available to them even in ownership of a used vehicle – for example, GAP insurance. What is it, and why might it be a viable option for new motorists?
What is GAP Insurance?
GAP is an acronym, which stands for Guaranteed Asset Protection. Guaranteed Asset Protection insurance is an additional layer of insurance coverage, into which you enrol separate to your main insurance plan. GAP insurance covers the difference between the offer from your insurance company and the value of your vehicle, in the event of a write-off accident or the theft of your vehicle. This additional insurance can represent a valuable financial buffer, ensuring you get the total value of your car back in order to purchase an adequate replacement, or compensate for the difficulties incurred from suffering the loss of your vehicle.
Am I Eligible for GAP Insurance?
In short, there are only two stipulations regarding eligibility for GAP insurance: your age, and your car registration status. If you are over the age of 18, and a registered driver of your vehicle at the time of application. However, eligibility is only one side of the coin – the more useful question might be, “why would I need GAP insurance?”
There are a few ways to answer that question, but we need to start with the acknowledgement that many insurance providers assure the replacement of a vehicle in the event of a write-off or a car theft. However, this coverage is often only included in the first year of cover, and otherwise a prohibitively expensive addition. You may need GAP insurance if your car was paid for on finance, and you still owed payments at the time of the incident. Here, your insurance pay-out would be soaked up by the finance company, leaving you with little; GAP insurance covers the difference between the value and the offer, returning you more money or allowing you to completely square your finance debt.
GAP insurance might also be a good idea for you if you have recently purchased a relatively new second-hand vehicle. In buying a newer model second-hand car, you benefit from the initial depreciation in value from leaving the showroom, but also the relative good condition afforded by a newer car. Your car will depreciate further in value over your ownership, and in the event of an accident or theft your insurance offer might only reflect the present value of your car. GAP insurance can pad this offer, up to the value of the car when you purchased it.
Is GAP Insurance Worth It?
This information poses the question: is GAP insurance worth it? Ultimately, only you as an individual car owner and driver can make that decision, but various factors can come into play when figuring out whether or not to invest the extra money in coverage. These factors include your average weekly mileage, and your driving style. However, the fact that GAP insurance negates depreciation in the event of a serious incident suggests that the additional coverage could more than pay for itself in the worst-case scenario.