Did you know that you could lose thousands of pounds in the event of a write-off? This is because your comprehensive motor insurance provider will only pay the current market value, which could leave you short as a result of depreciation. You can avoid this with GAP insurance, which is a type of insurance that will cover the shortfall between the payout and the amount originally paid or the amount outstanding on a finance agreement.
The Value of GAP Insurance
There is one case study that shows the importance of GAP insurance and how it could help you to avoid a sticky financial situation. This is a customer of Direct Gap that had a 4-year vehicle replacement insurance policy that started in July 18. The customer purchased a Mercedes E Class for £47,000 and was involved in an accident in March 2021 that resulted in the car being declared a total loss.
Depreciation
The motorist was parked on the road when she was hit by a large commercial vehicle. This led the car to be declared a total loss, but the value of the car at the time was £26,000. This means that the car had depreciated by a staggering 20K in less than 3 years with a new replacement now costing £48,000.
Bridge the Gap
The customer’s insurance company paid the £26,000, which left a shortfall of an eye-watering £21,000. Fortunately, she had Mercedes GAP insurance in place and this was the amount that she received to cover the cost of a new vehicle with the same spec as the previous model.
A Happy Outcome
As you might imagine, the motorist was delighted with the outcome and avoided a very nasty financial situation after the shock and trauma of being involved in a write-off. As a sensible motorist and someone that has seen the value of GAP insurance first hand, she was sure to take out a new policy to go with her new Mercedes E Class.
Lessons to be Learnt
This is the largest claim that was paid out and an amazing story. There is also a lot to learn here as although it is an extreme example, it clearly demonstrates the value of GAP insurance and how you could be seriously out of pocket without it as a result of depreciation. Even for less valuable cars, motorists might struggle to afford a replacement as cars lose such a big percentage of their value over time.
GAP insurance provides financial protection in the event of a write off, but it also provides peace of mind. When you know that you are protected and you will not lose out on a huge sum if your car is involved in an accident or stolen, it can greatly reduce stress and improve your life.
