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Total losses – Mind the GAP!

Picture the scene – you’ve bought yourself a brand new, top of the range car on hire purchase. While everything might be rosy to start with, imagine the worst happens – after the first year, your car is stolen or written off. Although distressing, at least you have your vehicle insurance to pay for the damage. But what’s the situation with claims payouts with your hire purchase vehicle? 

You car insurance will only pay out the market value of the vehicle i.e. the value of the vehicle at the time of the incident. With the purpose of insurance to put you back in the same financial position as you were before the incident, this can be expected – the purpose is for you to, in essence, replace your car with one of the same condition.

However, with the growing use of lease, hire purchase and finance in the motor market, this poses a significant problem. With the payout from a claim only being the value of the vehicle at the time, this can leave a shortfall between the claim payout (which would be paid to the vehicle hirer) and the total left outstanding, potentially leaving you with a significant chunk to find from your own pockets for a vehicle you can no longer use. This means you might still have to make payments for a scrapped vehicle!

This gap in value can be filled with the aptly-named GAP Insurance. The intention of this policy is to top up your claim payment to cover the shortfall between the value of the vehicle as new and the value of the vehicle at the time of the incident, therefore preventing you from needing to fill the gap from your own funds.

Cover can be arranged from as short as 12 months to as long as 48 months – essentially covering the length of your vehicle lease. GAP Insurance isn’t limited to leased vehicles or vehicles on finance either – if you bought your vehicle outright, GAP Insurance would provide you with top-up funds to purchase a new car rather than one of the same age.

While you will most likely be offered this cover at the dealer you bought or leased your vehicle from, ProAktive are able to offer a competitively priced ‘Return to Invoice’ policy to fill the gap between the claim payment and the exact price paid for the vehicle. To speak to us about this please call us on either 01302 341 344 or 0114 243 9914.

By Sam Harby Dip CIICommercial Account Handler


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