No one plans for their car to gets damaged or stolen, but unfortunately, these things happen, and even more often than you would think. Statistics are discouraging when it comes to the number of cars stolen or written off each year, so, there’s actually more chance for you to face the same situation than no to, making it essential to recheck if your insurance is really enough to keep you covered.
What is GAP Cover?
GAP, or Guaranteed Asset Protection, is a type of insurance that gets you completely protected in case your care gets written off or stolen, by covering the gap between insurance company’s payout and actual price you paid for your car, allowing you to get the full value back and easily replace your car, without having to withdraw additional funds from your personal budget.
Why would I need GAP Cover?
When you buy a car, the instant you start using it, it already start losing its value, in insurance company’s eyes, anyway. So, if it gets stolen or damaged beyond repair, the insurance company will pay out the value of the car they determine, which is probably a lot less than you need to replace your car with a similar one. For example, let’s say you bought your car three years ago for $50,000, and it gets stolen or written off due to damage. Statistics indicate that new cars lose about 60% of their original value in the period of three years, which would mean that the insurance company would reimburse you for their estimate of your car’s current value, which would, in this case, be $20,000. That leaves you short for $30,000 if you want to buy the same car or an equivalent one. That’s where GAP cover comes as a life saver.
By bridging the gap between the insurance company’s payout and actual value of your car, GAP helps you to replace your car without any additional costs. Most people are not aware of how fast the value of their car depreciates, so there have been many cases where insurance payout was a really unpleasant surprise, forcing people to either settle down with a cheaper car than they previously owned or to spend a lot more money just to get back what they already had, and thought to be fully insured.
Types of GAP Insurance
There are three types of GAP insurance, and depending on your current situation, you should decide on the one that will suit you the most, if the need arises:
- New car GAP insurance- otherwise known as vehicle replacement insurance, this covers the gap between the estimated car’s value and its value on the day you bought the policy
- Finance and contract hire GAP insurance- bridges the gap between your car’s value on the day it got stolen or written off and the amount left to pay it off
- Return-to-invoice insurance- covers the difference between your car’s estimated value and the original invoice price you paid when you first bought it