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Guaranteed Asset Protection (GAP Insurance)

Guaranteed Asset Protection (GAP Insurance)

GAP Insurance is often overlooked as an unecessary cost when purchasing a new or used vehicle. Promoted by motor traders who have a limited range of products, lack of appreciation of the benefits, as well as high cost it normally results in a 'decline to take up'. Frequently the products available through Bayliss & Cooke can show savings of up to 50% against those offered by motor traders.

Around 384,000 vehicles are declared written off by insurers in the UK each year, of which some 54,000 vehicles are classified as light commercial vehicles. This includes vehicles stolen and not recovered and damaged by fire. With the majority of business vehicles financed, incidents with written off vehicles can leave a large shortfall between what is outstanding on the finance and what an insurer will pay in the event of claim. Comprehensive motor insurance is written on an indemnity basis i.e. market value at the time of the loss.

To illustrate how a shortfall may arise below is an example which recently occurred to one of our clients.

Our insured's car was written off in an at fault motor accident. The vehicle was the subject of a contract hire agreement, with no option to buy at the end of the 36 month term and GAP insurance from the main dealer had been declined. Following the engineer assessment insurers market value of the vehicle was agreed at £27,101 but the lender required settlement of outstanding monthly payments due until expiry of the agreement of £8514 and £23,008 for the vehicle, totalling £31,522. This left a shortfall of £4,421 including the insureds £250 excess. For a small one off premium for up to 5 years cover the insured would have been protected up to the invoice value of the vehicle or finance settlement figure, whichever is the greater.

Premiums are assessed in bands and depend on the purchase price of the vehicle and the length of the finance agreement. They can start from as little as £95 including Insurance Premium Tax.

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