In this article, we answer the question ‘how does gap insurance work on finance?’. We provide an example of a gap insurance pay out to give you an idea. Continue to read to find out more.
GAP insurance is financial help in the unfortunate event of a total loss.
A total loss is when a car is written off in an accident or is stolen. It is in the best interest of vehicle owners to insure themselves against a total loss of their vehicle. One of the most effective ways to do that is through getting gap insurance.
GAP insurance quite literally bridges the gap between your motor insurance pay out and one of the following: the original price that you paid for the vehicle (RTI), the cost to replace the vehicle or the amount remaining on finance (RVI).
The most common way in which GAP insurance will pay out is through paying off the amount left on the car’s finance. However, keep in mind that insurers only pay the value of the vehicle at the time of the incident. Therefore, it is likely that they will pay out less than what remains on the finance.
In most cases, the insured will have zero to little outstanding financial liability. This is because the insurance company will pay off the remaining amount.
So, how does GAP insurance work on finance? For example, your vehicle was bought at the original price of £10k.
At the time of total loss, it was valued at £7k. This amount would be paid for by your car insurance. Your GAP insurance will then bridge the missing amount between your insurance pay out and the original price you paid. In this scenario, it would be £3k. As a result, you’re not left worse off as you would be getting the full amount that you paid originally.
This is why it is particularly important for car owners who took out their vehicles on finance to buy gap insurance. It will ensure that in an unfortunate event of a total loss, the insured will not be on any financial liability. Without gap insurance, a car owner could be short of a few thousand pounds.
Speak to one of our agents today to start protecting your vehicle.
We cover cars, vans, motorbikes and taxis and will consider most car ages! At GAP Insurance Today, we always aim to know the ins and outs of your situation so we can offer you the right policy. Call us today or use our ‘Get A Quote’ system to get an instant quote!