Look out for these when buying GAP insurance to ensure you get the best policy to
protect your investment.
1. Market Value Clause
If you purchase a GAP policy with one of these clauses and your Comprehensive insurer pays less than the retail value in the event of a total loss, you could be left with a shortfall. Your GAP insurer only pays from the market value not the payment you actually received from your motor insurer.
2. Free Transfer
Most GAP policies expire when the applicable vehicle is sold. If you change your
vehicle at any point a good GAP policy will let you transfer any unused premium free
of charge and deduct this from the price of a policy on your new vehicle.
3. Maximum Value Clause
This is another clause to avoid. This places a cap of between 100% and 110% of the
retail value which may mean that the added extras you’ve paid for won’t be covered by your GAP policy.
4. Time Limit for making a Claim
A good GAP policy will give you plenty of time to make a claim, accounting for the
possibility that there can be delays when your car has been written off. A policy which gives you 120 days to claim rather than just a standard 30 gives you a bit more breathing space.
5. UK Underwriters
Underwriters, like all businesses, can fail. GAP providers’ operating outside of the UK can have different obligations if this happens and you have to look into these obligations before you purchase. If you buy a GAP policy underwritten by a FCA
authorised and regulated UK insurer and they cease trading then your GAP policy is
protected under the Financial Services Compensation Scheme – less hassle, no worry!
6. Deferred Policies
A number of motor insurers offer new-for-old replacement on brand new vehicles in the first year, encouraging some customers to defer the start of their policy. ALA do not offer deferred policies because during that first year the insurance company can revert back to paying only the market value for various reasons; mileage or condition of the vehicle and in some instances if the vehicle is stolen. It is for these reasons that we recommend that our customers have a GAP policy running alongside this new-for-old period, as we promise to bridge the gap if they settle at market value or start a new policy free of charge if their comprehensive insurer replaces their vehicle in the first year.
PLEASE NOTE: The guidance published in this article is for information only and does not constitute financial advice or a recommendation of any particular car insurance product or company. If you are in any doubt please consult an independent insurance adviser. A database of advisers in your area is available at www.unbiased.co.uk
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