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The problem with any form of Gap insurance is that drivers simply don’t realize how important it is. This easy-to-read, explanatory article was written to help you understand the importance of gap financing insurance, and to avoid stereotypical insurance terminology.
Finance gap insurance, also known as contract rental gap insurance, only applies to a vehicle that was purchased under a financial agreement, such as a lease, hire purchase, or lease purchase.
In its simplest explanation, financing gap insurance is designed to allow the driver to walk away from the financing agreement without any liability if the vehicle is written off in the unfortunate situation. When entering into a financing agreement for a vehicle, the sole concern of the respective driver is to eventually pay off the agreement after the end of the agreed period.
When entering into a financing agreement, the majority of drivers are unaware that if the car is written off in the unfortunate event, even if it is not their fault, they are still liable to pay off the agreement.
For illustration purposes, Barry has purchased a Honda Civic under a financing agreement that requires Barry to pay £200 for the next 24 months. However, as a result of poor highway maintenance, 12 months down the line, Barry was involved in an accident that brought his car to a halt, but luckily he was unharmed.
So Parry is still in theory liable for 12 months of £200 payments, for a total of £2,400. Barry’s comprehensive insurance company pays £1,200, leaving the remaining £1,200 under Barry’s responsibility.
And here comes the role of GAP Financial Insurance. Essentially this policy would pay Barry the remaining £1,200.
Bari is now free from any financial liability.
Please note: Finance Gap does not reimburse any financial penalties resulting from late payments that occurred before your car was written off.
Please note: a financing gap cannot cover a loan shortfall if the agreement is not related to a car. For example, if it is linked instead to a bank or a personal loan.
Please note: If your financing agreement includes paying a large deposit, or if you alternatively pay for your car in cash, this form of GAP insurance is not suitable for you.
Please consider Refer To Invoice (RTI) or Vehicle Replacement Gap Insurance.
Again in the simplest terms:
Back to the bill It returns you to the original invoice price you paid for your car if your car was written off in the unfortunate event. If your comprehensive insurer paid £10,000 and you originally paid £20,000 for your car, this policy will bridge the gap and pay you the £10,000 owed.
Vehicle replacement Replaces your vehicle if your vehicle is written off in the unfortunate condition. If you pay an invoice price of £20,000, and are told it has risen to £25,000, and your comprehensive insurance company only pays you £10,000, the replacement car will pay you the £15,000 outstanding you need to buy a car of the same age, mileage, the condition you originally purchased.
