Return to Value Gap Insurance
Gap insurance covers the costs your motor vehicle insurance will not cover in the case of total loss. A vehicle can be considered a total loss after an accident or other incident. Total loss means the vehicle repairs are more than the actual value of the car. It does not matter what you might have paid for the vehicle or owe on the car loan when it comes to motor vehicle insurance. It can be difficult to deal with a total loss of a vehicle especially when you are losing income to pay for the loss.
Return to value gap insurance is just one type of gap insurance. It is not for every vehicle driver. It is suitable for car owners where the car is 7 years old or younger. Car owners for private or dealer sourced cars can be covered. It also does not matter if you paid cash or had to take a loan. Return to value gap insurance does cover contract hire or leasing arrangements as well.
Motor vehicle insurance pays you for what they consider the car was worth before the incident. This amount may not reflect what you owe or need for the total loss. Therefore gap insurance will pay the difference of what the motor vehicle insurance values the car at and what it should be valued at. In other words return to value gap insurance pays for the depreciation that occurs on your car.
Your car will depreciate over the years. It can actually lose up to 77 percent of its value in three years. In the UK every minute a car is stolen, and over 500,000 cars are considered a total loss each year. These numbers are startling to read about. You have to ask yourself what happens in these situations, especially if all you have is motor vehicle insurance. The good news is return to value gap insurance exists for the very reason that often motor vehicle insurance does not cover you fully for the loss.
Features of gap insurance:
• Gap insurance can offer a refund of up to £25,000
• The insurance will cover £50,000
• The insurance can be in place on vehicles of 80,000 miles or less
• Vehicles that are 7 years or younger are covered
• There is no mileage restriction after the policy is purchased. Other gap insurance such as return to invoice or vehicle replacement has mileage caps.
• It does not matter how the vehicle was paid for regarding loan or full payment in cash.
We have already looked at the benefits of the policy, but we must mention there are some downsides to having gap insurance. There are exclusions in the policy. These exclusions can make it difficult to get the difference between value and the motor insurance payout.
First, if your vehicle did not have comprehensive coverage the gap insurance will not cover you. This also means if the total loss was not covered under the motor vehicle policy the gap insurance will not be paid out. Any time you modify a vehicle you are voiding the motor vehicle insurance as well as gap insurance. Insurance companies do not pay out unless you have allowed the car to remain the same as the manufacturer specs. If you add roll cages, steering extensions, or up rated brakes the policy is nullified. There are certain upgrades you can do. These include car entertainment changes, tow bar, roof rails, hands free kits, etc. Basically anything that does not change the safety of the vehicle will be covered.
A vehicle bought for car hire, haulage, racing, off road adventures, etc. will not be covered. Vehicles are designed to be driven in certain ways. If you deviate from this the gap insurance will not cover it.
Costs regarding motor vehicle insurance, warranty, extras, etc. do not have anything to do with the vehicle accident thus they are not covered. Anytime the vehicle is not under the insured’s control they are risking non- payment if an accident occurs. Only the person or persons named in the gap policy can file a claim.
Return to value gap insurance can provide peace of mind to the car owner as long as the exclusions are paid attention to. There are some issues with return to value gap insurance other gap policies do not have. Value will decrease over time, making it difficult in some cases to get a decent payout from the gap insurance as well as motor vehicle payout.
