Mind the Gap Between your Total Loss Payout and Full Value of Your Car
Unfortunately, many motorists are driving around unaware of what their fully comprehensive insurance policy does and does not cover. Some do not realise that if their car were to be written off or stolen, their insurer will only pay out the current market value of the automobile. Due to depreciation, which can be as much as 70% after three years of ownership, this will leave them seriously out of pocket.
Carless and Out of Pocket
This payout could be significantly less than the amount outstanding on your finance agreement, which will leave you carless and paying finance for an automobile that you no longer can drive. Alternatively, it will not provide you with enough to buy a replacement vehicle. So, what can motorists do about this to protect their investment and get peace of mind?
Fortunately, there is an easy solution in the form of GAP Insurance. This is an optional policy that will cover the shortfall between the amount paid by your insurer and the full value of the automobile or the amount outstanding on your finance agreement. As an example, if the original value of your car was £18,000 and you make a total loss claim after 4 years, you would only receive somewhere in the region of £525 (based on average depreciation rates). Without GAP Insurance, this would leave you £975 out of pocket.
Do I Need It?
Some motorists believe that they do not need this type of insurance because they will never make a total loss claim, but this is a dangerous mindset. Accidents happen far too frequently, and your car could be written off in an accident that was not your fault. Additionally, car crime is on the rise in the UK and one-third of stolen cars are never recovered (keep in mind that valuable vehicles are usually targeted by criminals too). Finally, insurance companies also declare a vehicle a total loss if it is damaged in a fire or by flooding, so you are covered in this scenario too.
As you can see, a write-off could happen at any time and even the safest and most sensible driver could make a total loss claim. You will not want to be caught out and left carless and out of pocket, so GAP Insurance is a smart financial move that will protect your investment whilst also providing peace of mind. Some motorists do not realise that their fully comp policy will only pay out the current market value, so be sure to act and educate those that you know too.