Taking out a car insurance policy can often be a stressful and time consuming business, not to mention expensive. With so many different policies and providers on the market, it can also be difficult to find the right option for your individual circumstances.
GAP insurance is one type of car insurance which may at first seem confusing, not least because of the name. As such, here is a short guide to this insurance option.
What is GAP Insurance?
Whenever you buy a brand new car, it loses around a third of its value within the first year of being driven. This seems like an excessive rate of depreciation, but it is true that new cars lose their value much faster than their second hand counterparts.
GAP insurance is designed specifically to address this problem. If your new car is written off or stolen, your insurance provider would normally pay out its current value (and not what you actually paid for it). If you have a GAP insurance policy, then you should receive a payout equal to the value of the car when you bought it should it be written off.
The main benefit of this policy is that it gives drivers who have invested in a spanking new car peace of mind that they will not lose any money if the worst happens to their vehicle. It is also the only way to counter the creeping depreciation which blights new cars throughout their lifetime.
There are plenty of providers of GAP insurance, like ALA, so it is possible to shop around to find the most cost effective option, too.
Do You Need it?
Whether you need GAP insurance or not is really down to your personal risk tolerance, but it is not a legal requirement. It depends on how cautious you are as a person as well as how confident you are as a driver.
It also very much depends on the make/model of your car, and just how valuable it is. More expensive cars lose much more value overall, so it may be a particularly effective option for high end vehicles.
GAP insurance is something which you would thank yourself for having if your expensive new car’s life is cut unexpectedly short. For those who aren’t concerned about depreciation or their car’s shelf life, though, it may be better to steer clear.