Many motorists assume that their insurance provider would pay out the amount originally paid for the car or amount outstanding on a finance agreement in the event of a write off, but this is not the case. In a write off, the insurance company will only pay out the current market value of the car. Due to depreciation, this could leave you short by thousands of pounds.
GAP Insurance
Fortunately, there is a good solution in the form of GAP insurance. What is GAP insurance? This is an optional policy that bridges that gap between the insurance payout and the amount originally paid/outstanding on a finance agreement. Without GAP insurance, motorists would struggle to afford a suitable replacement if they purchased the car and they would have to continue making payments on a car that they no longer had with a finance deal.
Depreciation
Cars can depreciate by as much as 35% after just one year, which means that a write off could end up leaving you short by thousands of pounds if the car is written off. While the rate of depreciation slows after this, it is still a major factor and one that motorists need to consider when purchasing a car. As an example, if you buy a car for £20,000 and it is written off after 3 years, you would only receive around £8,000 from a comprehensive insurance policy. GAP insurance would bridge the £12,000 gap so that you do not find yourself in a difficult situation financially.
Should I Get GAP Insurance?
GAP insurance is optional, but most find that it is worthwhile because it offers financial protection and peace of mind. It is particularly useful for those that have purchased a new car and have the most to lose from depreciation as well as those that have taken out finance to buy the car.
Additionally, keep in mind that accidents are common on the roads and people are involved in serious accidents daily without even doing anything wrong. Not only this, but car crime is a growing problem in the UK and cars that are stolen and never recovered are declared write-offs by insurance companies.
GAP insurance can protect motorists and ensure that they are not left out of pocket, carless and in a difficult financial spot following a write-off. Depreciation is a major issue that motorists need to be aware of as it could lead them to be short by a significant amount if they are involved in an accident and do not have GAP insurance to fall back on.
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