maisbitt wrote:If insurance companies weren't such crooks then there'd be no need for GAP insurance. If your car gets written off, they should be obligated to give you enough money to replace that car like-for-like (age/condition/mileage), or to cover the remainder of the loan capital (excluding interest), after the first year, when depreciation is so high that the car could be worth less than the amount owed on it (depending upon loan length of term)
Before I go any further, I don't wish to be accused of trying to mislead the forum members and subsequently I wish to identify myself as the "David" referred to by the OP. Obviously as a retailer of GAP Insurance I am biased towards my/our own products, but I will try to ensure that my post(s) are as "general" as possible. I trust this will ensure that I remain compliant with the T's & C's of the forum.
Maisbitt, With respect, I think you're slightly missing the point of a number of different types of GAP Insurance, because even in your example, there would still be a need for GAP Insurance...
The only time there would arguably
not be a need for GAP Insurance is if the motor insurance company agreed to either replace the vehicle new-for-old or reimburse you the original price you bought the vehicle for. It's worth noting on this point that many motor insurance companies do now provide new-for-old cover during the first 12 months for a brand new vehicle and subsequently in the majority of cases there would arguably be no need to have any form of GAP Insurance running during that first 12 month period -
although there are exceptions and anyone "banking" on their new-for-old scheme under their motor insurance policy should check exactly how the new-for-old scheme works.
The issue, is that regardless of new-for-old cover being present in many motor insurance policies (for brand new vehicles that is), almost all GAP Insurance suppliers will insist that their GAP Insurance policy starts and runs alongside the motor insurer's new-for-old scheme. In most cases if you elected to NOT buy GAP Insurance (E.g. because you have new-for-old cover during the first 12 months), almost all GAP Insurance suppliers would then prevent you from buying a policy (with the exception of "Retail"/"Return to Value" GAP Insurance - see below) if you were to wait until the end of that 12 month period to take GAP Insurance out.
There is however a supplier of GAP Insurance who, whilst still insisting that you must buy their GAP Insurance policy within "so many days" of buying the vehicle and/or the vehicle being first registered, that will allow you to defer the start date of their GAP Insurance by up to 12 months in order that the GAP Insurance policy only kicks in once the new-for-old cover under your motor insurance policy has expired.
However I stress that before electing to defer the start date of a GAP Insurance policy you should double check exactly how the new-for-old cover works, as it is possible to require GAP Insurance within the first 12 months even if you have new-for-old cover.
Anyhow... I have digressed slightly...
If I've understood your post correctly, you correctly suggest that the payout from your motor insurer in the event of a total loss, *should* indeed allow you to replace that vehicle with one of the same age, condition and mileage at the time of claim, this is indeed what they *should* be doing as they are obliged, so far as is possible, to put you back in to the position you were in immediately before the total loss... although it is of course common knowledge that the motor insurer will attempt to pay out as little as they justifiably can and a negotiation over settlement will almost always ensue.
GAP Insurance however, goes above and beyond the payout from your motor insurer though, with the actual level/amount of cover varying considerably depending on the form of GAP Insurance purchased.
In general there are four different types of GAP Insurance available in the UK. Which, in the event of a total loss, work in the following manner.
Finance GAP Insurance
Pays the difference between your motor insurance payout and the amount outstanding on finance at the time of write-off.
Invoice GAP Insurance
Pays the difference between your motor insurance payout and the original purchase price that you paid for the vehicle.
Replacement GAP Insurance
Pays the difference between your motor insurance payout and the equivalent cost of replacing the vehicle new-for-old at the time of claim - even if the replacement vehicle costs more than you originally purchased the vehicle for.
More recently, some suppliers have elected to merge "Finance" and "Invoice" GAP Insurance together, thereby having a policy that will pay out to the greater figure of either the original purchase price or the finance agreement settlement figure at the time of claim.
The three policy types above, usually have to be purchased within so many days of the vehicle being purchased and/or first registered. The "so many days" can vary from 30 days to 180 days depending on the GAP Insurance supplier chosen.
For vehicles purchased more than the applicable "so many days" ago, there's often a policy called "Retail Value" GAP Insurance available... some company's refer to it as "Return to Value" GAP Insurance and this type of policy would usually be available for vehicles which are up to 6 years old (I believe there may be one supplier who can provide it for vehicles up to 8 years old) regardless as to how long you have owned the vehicle or from where the vehicle was purchased.
It works by establishing the current value of the vehicle according to a particular guide... be careful though because most companies establish the vehicle value by reference to the "Private Good" value quoted by Parker's Guide (
http://www.parkers.co.uk) whilst another establishes the value of the vehicle through reference to the "Retail Value" quoted by Glass' Guide. Note that the difference between Glass' Guide Retail Value and Parker's "Private Good" value, can often be considerable (with the Glass' Guide value usually being the higher of the two) - therefore it pays to consider the policy carefully.
Retail Value GAP Insurance
Pays the difference between your motor insurance payout and what was the "Value" (as defined by the individual policy through their chosen guide) of the vehicle on the day you bought the policy.
Therefore, in the event of a total loss,
even if your motor insurer
was to pay out enough money to allow you to replace the vehicle with one of the same age, condition and mileage as the one that was written off, GAP Insurance, (in topping your motor insurer's payout up to either the original vehicle value, the original vehicle purchase price that you paid, or the cost of replacing the vehicle with the brand new equivalent at the time of claim) would give you
even more money to replace the vehicle with - and therein lies the potential "need" for GAP Insurance.
Obviously if there's finance involved things get a little more complicated because the finance company would want their money, but with an Invoice (especially the combined Invoice + Finance) or Replacement GAP Insurance policy, and even potentially with a "Retail"/"Return To" Value GAP Insurance policy, in the vast majority of cases, in the event of a total loss and a combined settlement of motor insurance + GAP Insurance, the finance would be cleared and there would be money left over for the customer to use as a deposit towards their replacement vehicle.
I hope this information is of use to some of you. If any one has any questions about the information above, or GAP Insurance in general, please feel free to ask.
Regards
David