Gap insurance is a smart type of cover for motorists that will cover the gap between an insurance payout in the event of a write-off (market value) and the amount originally paid. Gap insurance could save you thousands, but it is important to be aware that there are a few different types available. The type that you need will depend on when you buy the policy, how you bought the car and what you want from the insurance policy.
These are the main types of gap insurance to be aware of.
Return to Invoice
As the name implies, this type of gap insurance ensures that you get back exactly what you originally paid for the vehicle. If you were to buy a car for £25,000, for example, and only receive £10,000 from your insurance company because that is what it is worth now, your gap insurance provider would pay out the remaining £15,000. Return to invoice gap insurance can also clear any outstanding finance that you have if you bought the car on a finance deal.
Return to Value
Return to value gap insurance differs from the above in that the value of your car at the time of taking out the policy is used. This is generally used for used cars and the gap insurance provider will use an industry expert like Glass Door to determine the value. One of the benefits of this type of cover is that you can take it out at any time as opposed to within a limited period as you would for return to invoice cover.
Vehicle Replacement
The most comprehensive level of gap insurance is vehicle replacement gap insurance. With this level of cover, you will receive either the amount paid for the vehicle, the amount of a brand new replacement of the exact same car or the amount outstanding on a finance agreement. Unlike return to invoice, this level of cover will cover the cost if the value of the vehicle has risen. This also means that this is a smart level of cover if you purchased the vehicle at a discount.
These are the main types of gap insurance to be aware of. Gap insurance can save a motorist thousands of pounds by covering the shortfall between an insurance payout after a write-off and the amount originally paid, but you want to make sure that you choose the right type of gap insurance for your specific situation.
