Understanding Different Types Of Gap Insurance
GAP or Guaranteed Asset Protection insurance is increasingly becoming a popular choice in the country
. GAP insurance covers what the regular car insurance company may not pay if the car is a total write-off. There are different types of GAP insurance policies, which need to be understood clearly, so that you choose the one best suited to you.
Owning a car is followed by a wonderful sense of accomplishment, and of course the lifestyle changes that are instilled after using a car. But the future can never be predicted and in the event of an accident or a theft, your car can get declared a write-off by your insurance company. This may lead to a shortfall between the amount the insurance company pays, and the amount the finance company requires to settle the finance agreement. If the rate of depreciation of your car is high, and the remaining loan period is also high, then this shortfall can turn out to be a significant amount.
Your lender company will hold you liable for the shortfall, and you will be forced to pay for a car you no longer drive or own. This is where GAP insurance comes in, as it protects you by paying the finance company the shortfall amount and settling any outstanding loans on the car or the cost of replacing the vehicle. The high depreciation costs on cars and their falling resale prices, have made GAP insurance quite popular in the country.
There are different types of GAP Insurance policies. They are:
Return to Invoice GAP insurance RTI Gap insurance is the best solution for cars that are new or up to 7 years old. You can buy one, only if your car is at least 3 months old. This type of GAP insurance will pay the difference between insurance claim settlement or the outstanding settlement figure you owe the financier or the invoice amount (amount you paid for the car)- whichever is greater up to the claim limit you have chosen.
Finance GAP insurance This sort of insurance should be your choice if you have bought your car with a loan or a finance agreement including hire purchase or lease purchase. In this case, Finance GAP insurance will pay the difference between the car insurance claim settlement amount and the sum left outstanding in the loan agreement. In Finance GAP insurance, there is a chance that the payout could be more than the RTI GAP insurance and you eliminate the risk of financial negative equity.
Replacement GAP insurance- This sort of insurance will cover the cost of replacing your car with the equivalent model you bought, in the first place. This cover comes for new or Ex Demo cars, and has to be purchased within 3 months of car purchase. If your car gets into an accident or is stolen, and is written off, then Replacement Gap Insurance will pay the shortfall amount between the market value paid by your insurer and the cost of replacement vehicle (it has to be of the same make, age, mileage etc) or the money you owe to your finance company whichever is the greater.
Now that you know there are different types of GAP insurances in the country, and you can now make an informed choice about getting GAP insurance. Insurance is an important consideration in the process of
car finance Liverpool, Southampton, Oxford, Glasgow or Exeter, wherever you may be located, keep these facts in mind to get the best insurance for your car.
by: Julie Cheung
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