The world of insurance is a difficult one for consumers to navigate at the best of times. Often, the only meaningful engagement consumers have with insurance is that which they are legally obliged to have, in the form of car insurance.
In order for a car to be road legal, it needs to possess a valid MOT certificate and be fully insured by the driver. But there is another kind of optional car insurance that may soon become necessary for a growing majority of drivers in the UK.
Motoring Costs On the Rise
The UK remains in the midst of a cost-of-living crisis like no other, as living expenses of all kinds have been universally impacted by a high rate of inflation. Gas and petrol were the first to experience this hike, with domestic energy bills and refuelling prices skyrocketing at the end of 2021.
Car maintenance has also become more expensive, as supply of parts has been starved due to Brexit’s impact on imports and import costs. Altogether, this means a significant rise in costs for the average motorist – and especially those driving new vehicles that depreciate in value.
With money tighter than ever, one accident can be the difference between treading water and living without a vehicle altogether. But a form of insurance called GAP insurance could be the key to financial viability when it comes to driving.
What is GAP Insurance?
The GAP in ‘GAP insurance’ stands for ‘Guaranteed Asset Protection’. GAP insurance is a specific and separate kind of car insurance, that effectively bolts on to your existing insurance coverage. It is designed to cover the difference between your insurance pay-out and the purchase value of your vehicle.
In order to understand why GAP insurance is an important investment to consider, you must first understand the nature of car insurance. Insurers are not likely to insure your car for its full retail value, on account of a number of different factors. For one, your car will likely depreciate considerably in value from when you acquire it, and especially so if you acquire it new.
When to Get GAP Insurance
If you are in ownership of a brand-new or nearly-new vehicle, GAP insurance can ensure that the value of your investment is protected in the event of an accident. If your car is written off completely, your insurer will honour your claim based on information about your car’s age and state; your GAP insurance will plug the gap, returning you the full value you paid for the vehicle.
This is also useful if your car is on finance; even after an accident, you may be on the hook for the remainder of the payments. Your main insurance payout will not be enough to cover these payments, leaving you out of pocket for a car you no longer own. GAP insurance is the breakwater between you and further payments.