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Discussion Starter · #1 ·
I declined the dealership-offered GAP coverage on my new ID.4 last week with plans to buy third-party GAP coverage at a cheaper rate. I am a bit confused by two quotes I've received from ALA (which I've been told is a pretty respectable company for this sort of thing). For comparison, VW was going to charge £486 for three years of coverage.

On the ALA website there are two options - "Vehicle Replacement" or "Back to Invoice". As far as I understand, the former gets you into a similar car to the one you lost (same age/mileage/options/etc.) and the latter option gives you cash to get you back to what you actually paid for the car. Now, given my understanding of depreciation, the "Back to Invoice" option should be more expensive, as that would theoretically give you more value in the event of a claim. Yet that option is showing as cheaper on my quote... I am seeing £392 for four years of protection (versus three years with the VW offer) with "Vehicle Replacement", or £347 for four years of "Back to Invoice" insurance...

I am pretty sure I'm missing something here, can anyone explain it to me?

(Side note: I also declined the "LifeShine" dealer-provided protection since £509 seemed pretty high, is there a better third-party option for something similar, or should I get it through the dealer? Or ignore it? We have two small children, so I'm pretty terrified of what they will do to the interior of the car in the next four years...)
 

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I bought my Back to invoice gap insurance through Pickles and Burns, www.gapinsurance.co.uk they were really helpful in explaining it to me and very competitive on price - give them a call. 01484 490095
 

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Back to vehicle is good for when you expect the price of the car to increase relative to what you have just paid for it. This is not uncommon given reductions in PiCG, reduced discounts or a newer more expensive model being released.

As an example, you buy your ID4 today for £35k.

In 2 yrs time the car is written off and your insurance pays out £20k. RTI will only pay out the £15k shortfall, regardless of what the price of an ID4 is now. Say it's £38k. You would have to stump up the £3k to actually buy the car brand new again.

If you had vehicle replacement GAP instead, that would pay out the £18k shortfall in its entirety.

As for lifeshine, steer well clear. Look for a local detailer and pay them.
 

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FYI I went with totallossgap, mainly as they were the only company that could provide 5yr GAP cover on a used car, but also because they provide only a single product, which simply pays out the maximum of either RTI, vehicle replacement or return to finance. Also has no limit.

Also was the cheapest at £250, so £50 per year!
 

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'18 Zoe ZE 40 R110 + '21 VW ID.4 1st
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Discussion Starter · #5 ·
Back to vehicle is good for when you expect the price of the car to increase relative to what you have just paid for it. This is not uncommon given reductions in PiCG, reduced discounts or a newer more expensive model being released.

As an example, you buy your ID4 today for £35k.

In 2 yrs time the car is written off and your insurance pays out £20k. RTI will only pay out the £15k shortfall, regardless of what the price of an ID4 is now. Say it's £38k. You would have to stump up the £3k to actually buy the car brand new again.

If you had vehicle replacement GAP instead, that would pay out the £18k shortfall in its entirety.

As for lifeshine, steer well clear. Look for a local detailer and pay them.
Thanks, that was exactly what I needed to know!
 

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I declined the dealership-offered GAP coverage on my new ID.4 last week with plans to buy third-party GAP coverage at a cheaper rate. I am a bit confused by two quotes I've received from ALA (which I've been told is a pretty respectable company for this sort of thing). For comparison, VW was going to charge £486 for three years of coverage.

On the ALA website there are two options - "Vehicle Replacement" or "Back to Invoice". As far as I understand, the former gets you into a similar car to the one you lost (same age/mileage/options/etc.) and the latter option gives you cash to get you back to what you actually paid for the car. Now, given my understanding of depreciation, the "Back to Invoice" option should be more expensive, as that would theoretically give you more value in the event of a claim. Yet that option is showing as cheaper on my quote... I am seeing £392 for four years of protection (versus three years with the VW offer) with "Vehicle Replacement", or £347 for four years of "Back to Invoice" insurance...

I am pretty sure I'm missing something here, can anyone explain it to me?

(Side note: I also declined the "LifeShine" dealer-provided protection since £509 seemed pretty high, is there a better third-party option for something similar, or should I get it through the dealer? Or ignore it? We have two small children, so I'm pretty terrified of what they will do to the interior of the car in the next four years...)
Check if your insurer also provides new car cover as part of your policy if it’s written off/stolen in the first year.

If it does, you don’t need Gap just yet, and with ALA (and I’m sure others) you can set it up and pay just before the anniversary of delivery.
 

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'18 Zoe ZE 40 R110 + '21 VW ID.4 1st
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Discussion Starter · #7 ·
Check if your insurer also provides new car cover as part of your policy if it’s written off/stolen in the first year.

If it does, you don’t need Gap just yet, and with ALA (and I’m sure others) you can set it up and pay just before the anniversary of delivery.
Just checked, my policy has this:

142717


So it appears that it does indeed cover replacement of new vehicles, but that last line ("or pay the market value at the time of loss") worries me - isn't that what all insurance policies do? If my ID.4 depreciated a couple grand the moment it was driven off the lot (which is what all new cars do, isn't it?), and it gets written off 10 months from now, doesn't the wording mean I'll get a lot less than the £40k I paid?

Does the fact that I financed the car via PCP factor in at all?
 

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Does the fact that I financed the car via PCP factor in at all?
No, although it could mean GAP is more important if you dont have the capital to pay off the remaining finance. It's likely (unless the car holds its value very well or you have put a sizeable upfront payment) there wil be a shortfall between the insurance settlement and the finance you owed, which would need to be settled at the time of the total loss.

With GAP this would obviously cover that shortfall (plus the depreciation).
 

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Just checked, my policy has this:

View attachment 142717

So it appears that it does indeed cover replacement of new vehicles, but that last line ("or pay the market value at the time of loss") worries me - isn't that what all insurance policies do? If my ID.4 depreciated a couple grand the moment it was driven off the lot (which is what all new cars do, isn't it?), and it gets written off 10 months from now, doesn't the wording mean I'll get a lot less than the £40k I paid?

Does the fact that I financed the car via PCP factor in at all?
With the new for old 1st year thing, the insurers don’t physically replace the car, just give you the new price for your replacement car as settlement instead of a depreciated figure. It’s like a free years worth of back to invoice gap if you like.

Re the PCP thing, it’s unlikely to be an issue unless you’re running a very small deposit and in negative equity straight away, so it’s worth checking that. A properly setup PCP with sensible mileage limits should always be just in front of your settlement.
 

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'18 Zoe ZE 40 R110 + '21 VW ID.4 1st
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Discussion Starter · #10 ·
Re the PCP thing, it’s unlikely to be an issue unless you’re running a very small deposit and in negative equity straight away, so it’s worth checking that.
Nope, opposite case here... We part exchanged our Nissan Qashqai (£7,500) and put an extra £3k down, so our deposit (£11,250 with the VW contribution) is actually pretty huge...
 

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Nope, opposite case here... We part exchanged our Nissan Qashqai (£7,500) and put an extra £3k down, so our deposit (£11,250 with the VW contribution) is actually pretty huge...
Well, in that case you won’t have an issue re having enough of a payout even at new for old pricing from your insurer in the first year, you’ll be able to cover the early settlement figure and retain a deposit.

First year Gap might not be necessary for you then, that’s the only point I was trying to make. You could buy a 3 year policy at the end of year 1, which will be cheaper again than what you’ve been quoted.
 

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Discussion Starter · #12 ·
Well, in that case you won’t have an issue re having enough of a payout even at new for old pricing from your insurer in the first year, you’ll be able to cover the early settlement figure and retain a deposit.

First year Gap might not be necessary for you then, that’s the only point I was trying to make. You could buy a 3 year policy at the end of year 1, which will be cheaper again than what you’ve been quoted.
Thanks for the advice, I appreciate it!
 

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OK folks. There's a reasonable amount of misinformation in this thread so I thought I'd jump in and try to provide some clarity.

I declined the dealership-offered GAP coverage on my new ID.4 last week with plans to buy third-party GAP coverage at a cheaper rate. I am a bit confused by two quotes I've received from ALA (which I've been told is a pretty respectable company for this sort of thing). For comparison, VW was going to charge £486 for three years of coverage.

On the ALA website there are two options - "Vehicle Replacement" or "Back to Invoice". As far as I understand, the former gets you into a similar car to the one you lost (same age/mileage/options/etc.) and the latter option gives you cash to get you back to what you actually paid for the car. Now, given my understanding of depreciation, the "Back to Invoice" option should be more expensive, as that would theoretically give you more value in the event of a claim. Yet that option is showing as cheaper on my quote... I am seeing £392 for four years of protection (versus three years with the VW offer) with "Vehicle Replacement", or £347 for four years of "Back to Invoice" insurance...

I am pretty sure I'm missing something here, can anyone explain it to me?

(Side note: I also declined the "LifeShine" dealer-provided protection since £509 seemed pretty high, is there a better third-party option for something similar, or should I get it through the dealer? Or ignore it? We have two small children, so I'm pretty terrified of what they will do to the interior of the car in the next four years...)
In simple terms, if your car is written off, Invoice GAP insurance (aka "Back to Invoice" / "Return To Invoice") is about aiming to top-up your motor insurance pay-out to the original invoice price that you bought the car for. The theory being that you'd then take that original invoice price, settle what (if any) is remaining outstanding on finance at the time of claim and then use any remaining funds to put towards your next car.

Replacement GAP insurance (aka "Vehicle Replacement" cover) is about aiming to top-up your motor insurance pay-out to the cost of replacing your vehicle with a brand new equivalent at the time of claim - even if that's more than you originally bought the vehicle for. Note though that whilst most Replacement GAP insurance policies (including ours) will compare and pay to the higher of either the original invoice price or the brand new replacement price at the time of claim, not all policies specify that they'll pay "to the higher" of the two figures. In the event that the replacement price of a new equivalent vehicle has fallen by the time of claim, you want to ensure you have a policy that operates on the higher of the two figures otherwise there's the risk of having paid more for Replacement GAP insurance and ended up with a pay-out that was inferior to that of an Invoice GAP insurance policy.

Additionally, also note that some providers of Replacement GAP insurance, insist that either they must source your next vehicle and others will ask for proof that you're using the pay-out towards the cost of a replacement vehicle... otherwise, they'll only pay-out on an Invoice GAP insurance basis. Other Replacement GAP insurance policies (including ours) pay-out in cash to the policyholder (once any outstanding finance has been cleared - if applicable) without dictating that the funds must be used for any specific purpose (depending on the circumstances that resulted in the vehicle being written off you may not want the same make/model again... you may not even want to buy a car for a period of time... cash payouts are more flexible).


Check if your insurer also provides new car cover as part of your policy if it’s written off/stolen in the first year.

If it does, you don’t need Gap just yet,
and with ALA (and I’m sure others) you can set it up and pay just before the anniversary of delivery.
This... is outdated advice. It used to be the case: we were the first company to permit deferred start dates and/or purchase of cover up to a year after first registration if your motor insurer provided new-for-old cover in the first year. Whilst most GAP insurance providers followed suit in allowing the same, complaints arose as a result of motor insurers not delivering on their promise to replace the vehicle new-for-old (usually because the vehicle was financed by way of a PCP agreement and the finance company was denying them the option of replacing the vehicle new-for-old by insisting on a cash settlement instead (see more below)... but also it was often just because the motor insurer claimed there was no equivalent vehicle citing tedious reasoning in the process) leaving the policyholder stranded between a motor insurer not delivering on their promise of a new-for-old replacement, offering only market value and a GAP insurance policy that had not been purchased / started yet... the result is that the GAP insurance market in general has moved away from offering deferred start dates and has substantially reduced the time-window of eligibility for buying GAP insurance cover.

To my knowledge, there is currently only one single GAP insurance provider (a considerable reduction given most providers offered it 12-18mths ago) currently offering the ability to buy Invoice GAP insurance up to 12 months after taking delivery of the vehicle and that's a policy underwritten by an offshore unrated insurer - the likes of which have a habit of going bust. With five unrated offshore GAP insurers having gone bust since 2016 and policyholders being left stranded without cover as a result, we strongly advise against buying GAP insurance cover underwritten by an unrated offshore insurer. There are no providers to my knowledge that currently permit Replacement GAP insurance to be purchased more than 6-months after taking delivery of the vehicle.

The point is, if you wait to buy GAP insurance, your options will be increasingly limited, potentially to the point of not being able to buy GAP insurance at all.

Just checked, my policy has this:

View attachment 142717

Does the fact that I financed the car via PCP factor in at all?
First year Gap might not be necessary for you then... You could buy a 3 year policy at the end of year 1...
The fact you're financing the vehicle via PCP potentially makes all of the difference. It's entirely possible that a PCP agreement will entirely negate the new-for-old cover from your motor insurer.

Consider... if your vehicle was written off and you met your motor insurer's criteria to qualify for a new-for-old replacement vehicle, your finance company has to agree to your motor insurer's offer to replace the vehicle new-for-old. Let's say that happens at month 11 and that your finance company agrees. You take the new vehicle and run it until the end of the original PCP term. You now have to either pay the GFMV lump sum and keep the car or, sell it / trade it in and benefit from any equity. Except, the vehicle you now have is 11 months newer and therefore 11 months more valuable than the vehicle you would have had if it wasn't for the original vehicle having been written off. Which means that you have more equity in the vehicle as a result.

It's for this reason that with increasing frequency, we're seeing finance companies behind PCP agreements reject the offer of a new-for-old replacement vehicle on the grounds that to allow it, would permit you to profit from the original vehicle having been written off. In most cases where the motor insurer is unable to replace the vehicle new-for-old either because they believe there isn't actually an equivalent available at the time of claim or, the finance company is preventing them (as is more often the case), they'll revert to a market value pay-out (see your screenshot above) in which case you'll be needing/wanting GAP insurance to step in and cover the difference.

Some motor insurance policies will revert to an original invoice price pay-out as opposed to a market value pay-out... if you have one of these policies and/or you're a cash-buyer with no potential for a finance company to reject the offer of a new-for-old replacement vehicle from your motor insurer, you're basically just a victim of circumstance in this respect. Relative to GAP insurance cover with a reputable insurer behind it, deferred start dates are no longer a thing and as I've explained above, waiting to buy GAP insurance - particularly more than 90-days - would see your options considerably reduced and you run the risk of not being able to get cover at all.

In short, going without GAP insurance in the first year in favour of relying on new-for-old cover from a motor insurer is fraught with issues and nowadays, considered far from best practice.

With the new for old 1st year thing, the insurers don’t physically replace the car, just give you the new price for your replacement car as settlement instead of a depreciated figure.
Motor insurers offering new-for-old cover (assuming you meet their criteria at the time of claim to qualify for it) will look to physically replace the vehicle first (they can source vehicles at a discount therefore save money in the process) and only usually resort to a cash settlement (usually only market value - though as I've explained above there are exceptions) if that physical replacement is not possible.

HTH

And now for the shameless plug... for GAP insurance... check us out at gapinsurance.co.uk. Use discount code: SPEAKEV10 to save 10%
 

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We have a car on a private (not company) lease and the GAP requirements are different in this case. We have Contract Hire gap insurance from you. Can you (briefly!!) clarify that for the readership please @GAPinsuranceCoUk
 

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OK folks. There's a reasonable amount of misinformation in this thread so I thought I'd jump in and try to provide some clarity.



In simple terms, if your car is written off, Invoice GAP insurance (aka "Back to Invoice" / "Return To Invoice") is about aiming to top-up your motor insurance pay-out to the original invoice price that you bought the car for. The theory being that you'd then take that original invoice price, settle what (if any) is remaining outstanding on finance at the time of claim and then use any remaining funds to put towards your next car.

Replacement GAP insurance (aka "Vehicle Replacement" cover) is about aiming to top-up your motor insurance pay-out to the cost of replacing your vehicle with a brand new equivalent at the time of claim - even if that's more than you originally bought the vehicle for. Note though that whilst most Replacement GAP insurance policies (including ours) will compare and pay to the higher of either the original invoice price or the brand new replacement price at the time of claim, not all policies specify that they'll pay "to the higher" of the two figures. In the event that the replacement price of a new equivalent vehicle has fallen by the time of claim, you want to ensure you have a policy that operates on the higher of the two figures otherwise there's the risk of having paid more for Replacement GAP insurance and ended up with a pay-out that was inferior to that of an Invoice GAP insurance policy.

Additionally, also note that some providers of Replacement GAP insurance, insist that either they must source your next vehicle and others will ask for proof that you're using the pay-out towards the cost of a replacement vehicle... otherwise, they'll only pay-out on an Invoice GAP insurance basis. Other Replacement GAP insurance policies (including ours) pay-out in cash to the policyholder (once any outstanding finance has been cleared - if applicable) without dictating that the funds must be used for any specific purpose (depending on the circumstances that resulted in the vehicle being written off you may not want the same make/model again... you may not even want to buy a car for a period of time... cash payouts are more flexible).




This... is outdated advice. It used to be the case: we were the first company to permit deferred start dates and/or purchase of cover up to a year after first registration if your motor insurer provided new-for-old cover in the first year. Whilst most GAP insurance providers followed suit in allowing the same, complaints arose as a result of motor insurers not delivering on their promise to replace the vehicle new-for-old (usually because the vehicle was financed by way of a PCP agreement and the finance company was denying them the option of replacing the vehicle new-for-old by insisting on a cash settlement instead (see more below)... but also it was often just because the motor insurer claimed there was no equivalent vehicle citing tedious reasoning in the process) leaving the policyholder stranded between a motor insurer not delivering on their promise of a new-for-old replacement, offering only market value and a GAP insurance policy that had not been purchased / started yet... the result is that the GAP insurance market in general has moved away from offering deferred start dates and has substantially reduced the time-window of eligibility for buying GAP insurance cover.

To my knowledge, there is currently only one single GAP insurance provider (a considerable reduction given most providers offered it 12-18mths ago) currently offering the ability to buy Invoice GAP insurance up to 12 months after taking delivery of the vehicle and that's a policy underwritten by an offshore unrated insurer - the likes of which have a habit of going bust. With five unrated offshore GAP insurers having gone bust since 2016 and policyholders being left stranded without cover as a result, we strongly advise against buying GAP insurance cover underwritten by an unrated offshore insurer. There are no providers to my knowledge that currently permit Replacement GAP insurance to be purchased more than 6-months after taking delivery of the vehicle.

The point is, if you wait to buy GAP insurance, your options will be increasingly limited, potentially to the point of not being able to buy GAP insurance at all.





The fact you're financing the vehicle via PCP potentially makes all of the difference. It's entirely possible that a PCP agreement will entirely negate the new-for-old cover from your motor insurer.

Consider... if your vehicle was written off and you met your motor insurer's criteria to qualify for a new-for-old replacement vehicle, your finance company has to agree to your motor insurer's offer to replace the vehicle new-for-old. Let's say that happens at month 11 and that your finance company agrees. You take the new vehicle and run it until the end of the original PCP term. You now have to either pay the GFMV lump sum and keep the car or, sell it / trade it in and benefit from any equity. Except, the vehicle you now have is 11 months newer and therefore 11 months more valuable than the vehicle you would have had if it wasn't for the original vehicle having been written off. Which means that you have more equity in the vehicle as a result.

It's for this reason that with increasing frequency, we're seeing finance companies behind PCP agreements reject the offer of a new-for-old replacement vehicle on the grounds that to allow it, would permit you to profit from the original vehicle having been written off. In most cases where the motor insurer is unable to replace the vehicle new-for-old either because they believe there isn't actually an equivalent available at the time of claim or, the finance company is preventing them (as is more often the case), they'll revert to a market value pay-out (see your screenshot above) in which case you'll be needing/wanting GAP insurance to step in and cover the difference.

Some motor insurance policies will revert to an original invoice price pay-out as opposed to a market value pay-out... if you have one of these policies and/or you're a cash-buyer with no potential for a finance company to reject the offer of a new-for-old replacement vehicle from your motor insurer, you're basically just a victim of circumstance in this respect. Relative to GAP insurance cover with a reputable insurer behind it, deferred start dates are no longer a thing and as I've explained above, waiting to buy GAP insurance - particularly more than 90-days - would see your options considerably reduced and you run the risk of not being able to get cover at all.

In short, going without GAP insurance in the first year in favour of relying on new-for-old cover from a motor insurer is fraught with issues and nowadays, considered far from best practice.



Motor insurers offering new-for-old cover (assuming you meet their criteria at the time of claim to qualify for it) will look to physically replace the vehicle first (they can source vehicles at a discount therefore save money in the process) and only usually resort to a cash settlement (usually only market value - though as I've explained above there are exceptions) if that physical replacement is not possible.

HTH

And now for the shameless plug... for GAP insurance... check us out at gapinsurance.co.uk. Use discount code: SPEAKEV10 to save 10%
Best description of why you need GAP, and why cheap isn’t good I think I have read. Well done.
 

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We have a car on a private (not company) lease and the GAP requirements are different in this case. We have Contract Hire gap insurance from you. Can you (briefly!!) clarify that for the readership please @GAPinsuranceCoUk
Ha! I''m told I must try harder at "briefly" :) I'll do my best...

If your leased car is written off, your motor insurer will pay (to the finance company) what they (the motor insurer) believe the car to have been worth at the time of loss (the "market value").

Separately, your finance company will declare their Early Termination Fee (settlement figure). The calculation used to arrive at this settlement figure can vary considerably from one finance company to another. It's usually a combination of the sum of both what they (the finance company) believe the vehicle to have been worth at the time of loss (not usually too far removed from the motor insurer's valuation) plus something towards the sum of the rentals that you've not yet paid, but would have paid until the original end date of the lease but for the vehicle being written off.

This something is what varies from one finance company to another...

As an example, in January 2020 my house was burgled and both of our leased cars were stolen. We had an XC60 leased with Lex Autolease which was due to end in September 2020. The rentals were ~£350 per month and Lex only held us liable for 50% of the sum of the remaining rentals (~ £1,400) on top of their valuation of the vehicle. Our Kodiaq however, was leased with VW Financial Services and that 3-year lease had only begun the previous October 2019. The rentals were ~£363 per month and VWFS held us liable for pretty much the entire sum of the rentals to the end of the 3-year lease less a not-so-generous 4% discount (equating to ~£11,500), on top of their valuation of the car. In this case GAP insurance stepped in to cover those settlement figures plus reimbursed me circa £1,000 for each car relative to the upfront rentals I'd paid for each.

Without GAP insurance, I'd have had to find a little under £13,000 before I could have contemplated sourcing another vehicle... With GAP insurance, both lease agreements were settled and I walked away with ~£2,000 with which to start again.

Back in December 2014 though, I had a Volvo V40 leased with Lex, which was written off in a car accident. Back then the Lex lease contract was such that if the motor insurer's pay-out wasn't sufficient to clear their officially declared settlement figure (in my case it was ~£3,800 short) they would stand that "loss" and take the motor insurer's pay-out as full settlement - which is exactly what happened: I walked away without having to pay anything and no need to claim on a GAP insurance policy. I haven't seen an agreement of that nature since but it's not impossible that they're still available somewhere.

However the lease agreement settlement figure is calculated by the finance company, in the event of write-off Contract Hire GAP insurance aims to step in and pay the shortfall between your motor insurance pay-out and that settlement figure plus, if you build it in at the time of buying the policy, it will also reimburse you up to £3,000 of any initial rental that you paid at the beginning of the lease, intended to assist you in replacing the vehicle.

Contract Hire GAP insurance will not cover fees relative to excess mileage, arrears or maintenance within that settlement figure. Though if you're being reimbursed up to £3,000 of initial rental paid, you'd have funds at your disposal (other than funds coming directly out of your own pocket) to cover such fees if there were any.

With us you can buy Contract Hire GAP insurance at any point during your lease term so long as there's more than 12 months remaining (or more than 8-months remaining if it's a one-year lease). You can include cover for up to £3,000 of initial rental cover so long as you're within the first year of the lease (or within the first 4-months if it's a one-year lease). The policy will also reimburse you up to £250 of excess deducted by the motor insurer for the total loss claim.

Hmmm... briefly? :unsure:
 

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OK folks. There's a reasonable amount of misinformation in this thread so I thought I'd jump in and try to provide some clarity.



In simple terms, if your car is written off, Invoice GAP insurance (aka "Back to Invoice" / "Return To Invoice") is about aiming to top-up your motor insurance pay-out to the original invoice price that you bought the car for. The theory being that you'd then take that original invoice price, settle what (if any) is remaining outstanding on finance at the time of claim and then use any remaining funds to put towards your next car.

Replacement GAP insurance (aka "Vehicle Replacement" cover) is about aiming to top-up your motor insurance pay-out to the cost of replacing your vehicle with a brand new equivalent at the time of claim - even if that's more than you originally bought the vehicle for. Note though that whilst most Replacement GAP insurance policies (including ours) will compare and pay to the higher of either the original invoice price or the brand new replacement price at the time of claim, not all policies specify that they'll pay "to the higher" of the two figures. In the event that the replacement price of a new equivalent vehicle has fallen by the time of claim, you want to ensure you have a policy that operates on the higher of the two figures otherwise there's the risk of having paid more for Replacement GAP insurance and ended up with a pay-out that was inferior to that of an Invoice GAP insurance policy.

Additionally, also note that some providers of Replacement GAP insurance, insist that either they must source your next vehicle and others will ask for proof that you're using the pay-out towards the cost of a replacement vehicle... otherwise, they'll only pay-out on an Invoice GAP insurance basis. Other Replacement GAP insurance policies (including ours) pay-out in cash to the policyholder (once any outstanding finance has been cleared - if applicable) without dictating that the funds must be used for any specific purpose (depending on the circumstances that resulted in the vehicle being written off you may not want the same make/model again... you may not even want to buy a car for a period of time... cash payouts are more flexible).




This... is outdated advice. It used to be the case: we were the first company to permit deferred start dates and/or purchase of cover up to a year after first registration if your motor insurer provided new-for-old cover in the first year. Whilst most GAP insurance providers followed suit in allowing the same, complaints arose as a result of motor insurers not delivering on their promise to replace the vehicle new-for-old (usually because the vehicle was financed by way of a PCP agreement and the finance company was denying them the option of replacing the vehicle new-for-old by insisting on a cash settlement instead (see more below)... but also it was often just because the motor insurer claimed there was no equivalent vehicle citing tedious reasoning in the process) leaving the policyholder stranded between a motor insurer not delivering on their promise of a new-for-old replacement, offering only market value and a GAP insurance policy that had not been purchased / started yet... the result is that the GAP insurance market in general has moved away from offering deferred start dates and has substantially reduced the time-window of eligibility for buying GAP insurance cover.

To my knowledge, there is currently only one single GAP insurance provider (a considerable reduction given most providers offered it 12-18mths ago) currently offering the ability to buy Invoice GAP insurance up to 12 months after taking delivery of the vehicle and that's a policy underwritten by an offshore unrated insurer - the likes of which have a habit of going bust. With five unrated offshore GAP insurers having gone bust since 2016 and policyholders being left stranded without cover as a result, we strongly advise against buying GAP insurance cover underwritten by an unrated offshore insurer. There are no providers to my knowledge that currently permit Replacement GAP insurance to be purchased more than 6-months after taking delivery of the vehicle.

The point is, if you wait to buy GAP insurance, your options will be increasingly limited, potentially to the point of not being able to buy GAP insurance at all.





The fact you're financing the vehicle via PCP potentially makes all of the difference. It's entirely possible that a PCP agreement will entirely negate the new-for-old cover from your motor insurer.

Consider... if your vehicle was written off and you met your motor insurer's criteria to qualify for a new-for-old replacement vehicle, your finance company has to agree to your motor insurer's offer to replace the vehicle new-for-old. Let's say that happens at month 11 and that your finance company agrees. You take the new vehicle and run it until the end of the original PCP term. You now have to either pay the GFMV lump sum and keep the car or, sell it / trade it in and benefit from any equity. Except, the vehicle you now have is 11 months newer and therefore 11 months more valuable than the vehicle you would have had if it wasn't for the original vehicle having been written off. Which means that you have more equity in the vehicle as a result.

It's for this reason that with increasing frequency, we're seeing finance companies behind PCP agreements reject the offer of a new-for-old replacement vehicle on the grounds that to allow it, would permit you to profit from the original vehicle having been written off. In most cases where the motor insurer is unable to replace the vehicle new-for-old either because they believe there isn't actually an equivalent available at the time of claim or, the finance company is preventing them (as is more often the case), they'll revert to a market value pay-out (see your screenshot above) in which case you'll be needing/wanting GAP insurance to step in and cover the difference.

Some motor insurance policies will revert to an original invoice price pay-out as opposed to a market value pay-out... if you have one of these policies and/or you're a cash-buyer with no potential for a finance company to reject the offer of a new-for-old replacement vehicle from your motor insurer, you're basically just a victim of circumstance in this respect. Relative to GAP insurance cover with a reputable insurer behind it, deferred start dates are no longer a thing and as I've explained above, waiting to buy GAP insurance - particularly more than 90-days - would see your options considerably reduced and you run the risk of not being able to get cover at all.

In short, going without GAP insurance in the first year in favour of relying on new-for-old cover from a motor insurer is fraught with issues and nowadays, considered far from best practice.



Motor insurers offering new-for-old cover (assuming you meet their criteria at the time of claim to qualify for it) will look to physically replace the vehicle first (they can source vehicles at a discount therefore save money in the process) and only usually resort to a cash settlement (usually only market value - though as I've explained above there are exceptions) if that physical replacement is not possible.

HTH

And now for the shameless plug... for GAP insurance... check us out at gapinsurance.co.uk. Use discount code: SPEAKEV10 to save 10%
Thanks for taking the time to write all that, although to be fair I think it raises as many questions as it attempts to answer. There are lots of ifs, buts and maybes.

TLDR - Check with your own insurer re what happens if your new car is written off. I know that with regard to my policy as I asked. Check if you’d benefit from 1st year gap as a result of that answer.

I’m a fan of Gap insurance, don’t get me wrong, not so much of shameless advertorial posts though. 👍
 

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No, and it was an advert, however as the information was accurate and useful, I would say it was pretty helpful.

People don’t believe me when I say poor or very cheap (sub £80 per year?) cover just is not worth having - yes, like all insurance, you hope the chances of needing / using it are low, however in my experience the usage is higher than you might expect! The point is, I feel (opinion only) that it’s relatively low cost (compared to sums involved) and moderately high payout rates (compared to say buildings insurance) makes it a bit of a no-brainer for newer, high value vehicles such as most of us discuss on here....

You pays your money and all that, but wherever you get your GAP from, make sure firstly it’s a good policy, THEN look at the price.
 

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People don’t believe me when I say poor or very cheap (sub £80 per year?)
You keep coming up with these figures, probably to justify the inflated prices you try to sell your dealership Gap at, nobody is mentioning £80 a year, but nor is there any need to spend over the odds.

Like any purchase, do your homework, check your own circumstances, and beware the advice of anybody who stands to profit from it.
 

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You keep coming up with these figures, probably to justify the inflated prices you try to sell your dealership Gap at, nobody is mentioning £80 a year, but nor is there any need to spend over the odds.

Like any purchase, do your homework, check your own circumstances, and beware the advice of anybody who stands to profit from it.
I did go ahead and buy the ALA gap insurance yesterday - £342 for four years (£85.50 per year). Policy seemed solid - I did go for the "Vehicle Replacement" level because once the First Editions are done, getting similar specs might be more expensive.
 
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