All too often, buying a vehicle can be a confusing process, not least due to the array of extra financial products you may be offered alongside your new car or van. If these options aren't explained properly or fully, it can be difficult to know whether or not they're worth buying.
This is why we at Carbase ensure we explain exactly what each optional extra is and how it can benefit you as a used vehicle owner so that you can make an informed decision as to whether or not it's right for you.
What is GAP insurance?
GAP stands for Guaranteed Asset Protection and is one of the optional extras mentioned above. It's designed to cover the shortfall between an insurance payout amount and your vehicle's value when you bought it. Your insurance provider will typically only pay for the current market value of the vehicle, which could be noticeably lower than what you still owe on any finance agreement.
When is GAP insurance needed?
GAP insurance comes into play in the event that something happens to your vehicle; this could be if your vehicle sustains unrecoverable damage in a traffic collision, or if it's stolen.
If you finance a vehicle with a loan (such as a PCP agreement or Hire Purchase) and the vehicle is declared a total loss, GAP insurance can protect you from financial strain. It ensures that you're not left with a hefty outstanding loan balance after your insurance settlement. This is particularly the case if you put down a small deposit, as the shortfall is likely to be bigger.
It's important to note that GAP insurance claims are typically filed in conjunction with a claim made to your insurance company. Once your insurer settles the claim and determines the current market value, you can then proceed with filing a GAP insurance claim to cover the remaining balance.
What does GAP insurance cover?
GAP insurance covers the remaining value between the amount paid out by your insurance provider and the value of the vehicle when you bought it. GAP insurance covers you regardless of whether you bought your car used or new.
If, for example, you bought a car for £18,000 and it was stolen or totalled, but your insurer would only pay £12,000 for it, GAP insurance would provide you with the remaining £6,000.
What does GAP insurance not cover?
While GAP insurance provides valuable coverage, it's important to understand its limitations. It does not cover:
- The cost of extended warranties, maintenance or repairs
- Damage from routine wear and tear, mechanical breakdowns, or incidents unrelated to accidents
- Late payment penalties or fees.
What else do I need to know about GAP insurance?
Is GAP insurance worth it? Do you need GAP insurance? If you're unsure whether you need GAP insurance for your next used car or van, our infographic below should help.
Ready to find out more? Learn more about the RAC GAP insurance we offer here at Carbase as part of our Members' Protection Programme.