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Discussion Starter · #1 ·
Can some one who has had experience with claiming GAP insurance please expalin it to me?

I get the gist of it however having had a few DEFENDERS Stolen "Without GAP Insurance" i know how Insurance companys like to play, I.E. by their own rules or not all.

Will this actually cover me UP to the cost of replacement £45K?

So frinstance........ 2 years down the line my Veh gets stolen......... insurance says its worth £18K a bit of market research reveals they are actually fetching £26K, will the GAP cover the £18 - £26 = £8K OR will i get the £27K making it up to £45K for another Vehicle?

I've been told the latter, but the Cynic in me thinks it Knows i'll get £18K and give myself a gripper trying to Claw back some extra money to purchase another.

If anyone can make head or tails of that i'd greatly apreciate your experience.

Thanks,
 

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We've claimed on 'back to invoice' Gap in the past after a D2 was written off. My experience is that the insurer offers the market rate. Gap pays the difference between that and what was originally paid (ie the original invoice price). There was some haggling between gap insurer and car insurer about the market rate, but that was down to them. From a customer point of view, we got back the full invoice price through a combination of insurer payout and Gap payout; the latter also covered the insurance excess.

We've taken out 'back to invoice' Gap on the new car. Well worth it in our opinion.
 

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You can also go replacement value gap insurance.. If the cost of replacing your car like for like increases the gap covers that to..
 

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There are various types of GAP Insurance that act in different ways in the event your vehicle is declared a Total Loss (written off) through accident, fire or theft.

Finance GAP insurance:
Pays the difference between your Motor Insurance policy payout and the amount outstanding on finance at the time of claim.

You'll find only a small selection of companies (aside from Motor Dealers) selling Finance GAP insurance these days as it's generally regarded (with the exception of policies to cover Contract Hire Agreements) as a poor/inferior type of GAP insurance.

Invoice GAP insurance:
Pays the difference between your Motor Insurance payout and the original on-the-road invoice price (after discounts but before part exchange allowance and deposit(s) etc) to buy the vehicle first time around.

These days Invoice GAP insurance is the most popular type of GAP insurance (if not only because most Motor Dealers don't offer any superior policy). In addition most companies now offer a combined Invoice & Finance GAP insurance policy which, in the event of write off, pays the difference between your Motor Insurance payout and the greater of either, the original on-the-road invoice price paid for the vehicle OR the amount outstanding on finance at the time of claim.

Finally, there's also Replacement GAP insurance
Pays the difference between your Motor Insurance payout and (in the case of a vehicle bought brand new and you were the first registered keeper) the cost of replacing the vehicle with a brand new version of the same (or nearest equivalent vehicle at the time of claim - even if the replacement vehicle costs more than you bought the vehicle for first time around.

There's also now combined versions of Invoice/Replacement (paying up to the greater of the original purchase price OR replacement price) and even combined Finance/Invoice/Replacement policies (paying up to the greater of either the amount outstanding finance, original purchase price OR replacement price at the time of claim).

In many cases Replacement GAP insurance is also available for used vehicles, whereby it'll pay the difference between your Motor Insurance payout and what it would cost at the time of claim to replace the vehicle with one of the same (or nearest equivalent) Make, Model, Specification, Age and Mileage as your original vehicle was at the time you first bought it.

I hope this helps.
 

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Take a look at car2cover website, pretty much the same as above but looks great value... i'm going to get replacement cover with them next week.
 

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So issue is then, what level of cover to apply? £15k, £20k, £25k?

Here's an example, new car invoice price is £41,778. So say I want 3 year cover. Doomsday scenario car written of in the 35th Month. So max depreciation of say 50%, assume insurance co pay 75% of that so settlement could be £15.6k. Therefore to get back to invoice I would need cover of £26k. If car written off in year one then clearly a lot less.

How do you estimate the level of cover you need?
 

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ALA discount only 5% saving me £10. Car2Cover for same policy £160 saving £50 on ALA
 

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asl1956 said:
So issue is then, what level of cover to apply? £15k, £20k, £25k?

Here's an example, new car invoice price is £41,778. So say I want 3 year cover. Doomsday scenario car written of in the 35th Month. So max depreciation of say 50%, assume insurance co pay 75% of that so settlement could be £15.6k. Therefore to get back to invoice I would need cover of £26k. If car written off in year one then clearly a lot less.

How do you estimate the level of cover you need?
Are you buying the car cash, or on finance?

If it's a PCP agreement... a good start point would be to deduct the GFMV from the original invoice price and the resulting figure should be your minimum Claim Limit. If it's a brand new vehicle you're buying, do the same exercise but start with the manufacturer's full list price (it pays to have a higher claim limit with Replacement GAP than Invoice GAP).

If you're buying the car cash, there's no initial suggestion from a finance company to start with, clearly, so then you have to look at average depreciate rates. In terms of the claims that we handle, the average car depreciates by between 50% and 70% over a 3 year period.

So If you're buying it for £41,778, 50% to 70% would give a range of between £20,889 and £29,245. With these figures, assuming a 3yr duration, I wouldn't go any less than £25k as an Invoice GAP insurance Claim Limit (in fact given very little difference in cost to the next level up, I'd probably go higher still) and I'd absolutely look to a higher Claim Limit for Replacement GAP insurance.
 

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Discussion Starter · #10 ·
Thank you very much for an informed post, Could you please anser the following,

On a Purchase price of £45K with a PX of £8250 & Cash Deposit of £9,500 which kind of cover should i be looking at to give the best cover back up to invoice price giving me the funds to purchase a new veh like for like.
 

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Chalky said:
Thank you very much for an informed post, Could you please anser the following,

On a Purchase price of £45K with a PX of £8250 & Cash Deposit of £9,500 which kind of cover should i be looking at to give the best cover back up to invoice price giving me the funds to purchase a new veh like for like.
Did/will you buy it brand new or used?

If it's brand new, how does the purchase price of £45k compare to the manufacturer's full list price?

What type of finance agreement are you utilising to fund the remaining £27,250?
 

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Someone has sent me a PM with questions about New-For-Old cover. However because I'm new to the forum today I'm currently unable to reply to PM's - as in the forum prevents me from doing so! The point raised is a good one though. I recently published a Blog article on this very topic - I can't link to the article itself (as that would identify who I am and breach forum rules) but I can certainly discuss the gist of it.

The person who sent me the PM specifies that they have their car insured with NFU and that policy incorporates a 24 month period of New-For-Old (N4O) cover during which if the vehicle is declared a Total Loss, the NFU will replace the car with a brand new one.

First of all... lots of Motor Insurance companies do now include N4O cover for a brand new vehicle. Usually it's just for 12 months, though to my knowledge only SAGA and NFU provide N4O cover for 24 months.

Secondly, this is often immediately seen as negating the requirement for GAP insurance during that period and as a consequence, plenty of people elect to wait until the end of that 12 or 24 month period before buying GAP insurance... only to then discover that by then, it's too late and the only form of GAP insurance they can get is based on the then-depreciated value of their vehicle rather than the original purchase price (Invoice GAP insurance) or replacement price (Replacement GAP insurance).

In principle, if you have N4O cover with your Motor Insurance and you're happy with it (there are quite specific things you should check), you still have to purchase GAP insurance within a set period of time after taking ownership of the vehicle (normally within 6-months) but with the majority of providers, when you buy the policy, you can elect to delay the start of the GAP insurance policy by as much as 12 months from when the vehicle was first registered.

This affords you the benefit of avoiding having duplicate cover in the first year, but still getting GAP insurance in the later years. Unfortunately there is not currently a provider who will allow you to delay the start date by more than 12 months.

However, it's not quite as clear cut as that because whilst some N4O schemes are superb, others are far from it....

Consider that SAGA claim to offer 2 year N4O cover, but the second year cover expires as soon as your vehicle reaches 12,000 miles.

Also consider that the SAGA policy states that in the event of damage by accident, you only qualify for a N4O replacement vehicle if the cost of repairing the vehicle exceeds 60% of what it would cost to buy a BRAND NEW version of that vehicle at the time of claim. But you can bet that if the cost of repairing your vehicle exceeds 60% of what your own car is worth they're going to write it off, in which case you'd be faced with the scenario of your car being written off because the cost of repair was sufficient to warrant it, but have that cost of repair fall short of the higher 60% of the brand new vehicle cost and therefore not cause you to NOT qualify for a N4O replacement and of course if you don't qualify, you're only going to get a Market Value payout and then you'd want GAP insurance in place.

In addition, if at the time of the loss (1st or 2nd year) a version of the same vehicle isn't available (either at all, or, within their required timescale) they'll resort to only paying you what they believe your vehicle is worth - in which case you'd want GAP insurance to pay the rest but of course, if you'd delayed the start date by 12 months and this was happening in month 10, the GAP insurance policy wouldn't be valid yet.

By comparison to the point immediately above, the Tesco Car Insurance policy states that if they cant find a physical replacement vehicle at the time of claim, they, "...will pay the most recent new list price, including VAT (where appropriate), for that specification of car." (Page 18 of their policy booklet as of February 23rd this year).

It's therefore very important that you check not only if you have N4O cover with your Motor Insurer but also how good it is and in that regard, you need to know the answers to the following questions:

  • If the vehicle is damaged in an accident. At what threshold (in terms of the cost of repair) is the vehicle declared a Total Loss?

    E.g. they may say that the they'll declare the vehicle to be a Total Loss if the cost of repair exceeds say, 50% of the current Market Value of your vehicle.
  • At what threshold (in terms of the cost of repair) is the claim eligible for a New-For-Old replacement?

    Sometimes there's an additional threshold such as "if the cost of repair exceeds 50-60% of the cost of buying a brand new version at the time of claim the New-For-Old clause is invoked".

    This is quite important as the difference between this and the first question above, can in theory see the vehicle written off but not quite eligible for a New-For-Old replacement - In which case you'd be needing to claim the difference via a GAP insurance policy.
  • What will they do (how will they handle the claim) if they cannot source a physical replacement vehicle?

    In our experience, there are three possible scenarios as follows:

  • The Motor Insurer pays you a cash-lump sum equivalent to the Manufacturer's List Price for buying a brand new version of the same vehicle at the time of claim - this would be like having Replacement GAP insurance in the first year.
  • The Motor Insurance pays you a cash lump sum equivalent to the price you originally paid to put the vehicle on the road - this would be like having Invoice GAP insurance in the first year
  • The Motor Insurance pays you only the Market Value of the car that was written off - this would clearly be like having no GAP insurance in the first year.

Ultimately, you don't want to be in a position of having deferred the start date of your GAP insurance policy, only for your car to be in an accident within the first year, declared a Total Loss, but not quite eligible for New-For-Old replacement of your vehicle, or, you are eligible, but one isn't available and your Motor Insurer is only obliged to pay you the Market Value of the vehicle that they're writing off.
 

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Thanks for your very informative post - some good points to consider in there!
 

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Some great info Flip, considering you atehyvsctuallyboromiting yourself or your broker.

If you don't mind can I ask whether u have issues with buying GAP insurance from the dealer or is it best to look elsewhere? Not only taking into consideration the price but quibble factor and convenience. My dealer is charging £500 for the 3 years on my spec (£43000)
 

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Peter79 said:
Some great info Flip, considering you atehyvsctuallyboromiting yourself or your broker.

If you don't mind can I ask whether u have issues with buying GAP insurance from the dealer or is it best to look elsewhere? Not only taking into consideration the price but quibble factor and convenience. My dealer is charging £500 for the 3 years on my spec (£43000)
Well, I look at it like this...

For £500 on a £43k car, from a dealer, you're only going to be getting Invoice GAP insurance and probably just for 3yrs . On the plus side, to my knowledge, if the vehicle costs you less than £75,000 they offer an "unlimited" Claim Limit (although in reality the Claim Limit would be limited to the original purchase price of the vehicle - e.g. they won't pay out more than the original purchase price in addition to the funds that you receive from your motor insurer - but then of course they'd never need to because it's entirely overkill).

By comparison, I'd sell an equivalent policy out at circa £163 That's £337 (or 67%) cheaper! With few exceptions, most of the online providers will (or should) be around the same price.

As an alternative though, if the vehicle is brand new, it's almost always the case that a Replacement GAP insurance policy would be superior. I'd sell the alternative Replacement GAP insurance policy (same duration and claim limit etc) for circa £204 which is £296 (or 59%) cheaper than Landrover's then inferior policy.

On this basis, yes, I'd have issues with buying GAP insurance from a Motor Dealer. Not only are they vastly more expensive, but superior policies are available online at over half their price.

So what usually happens, is that you'll go back to the dealer, decline their Invoice GAP insurance because you can get it for £163 online. So they agree to drop the price of their GAP insurance policy to £163 too.

Except, what also then usually happens is that they take the £337 off the price of the car (as detailed on the final invoice) instead of off the cost of the GAP insurance. Which means you're then left unaware (normally) that in the event that you have a claim on their Invoice GAP insurance policy which covers you for the difference between your Motor Insurance payout and the original invoice price of the vehicle AFTER discounts were applied, you're going to be £337 short at the time of claim.

Why would anyone buy GAP insurance from a Motor Dealer? :roll:
 
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