In 2022 alone, over 775,000 cars and over 100,000 commercial vehicles were built. This signifies just how vast the automotive industry is in the UK. From Ford to Rolls Royce, you are sure to see a plethora of different makes and models showcased on our roads.
One of the best ways to protect yourself on the road among all those drivers is to keep your insurance up-to-date and as comprehensive as possible. Gap insurance could be an additional layer of support that you need. But what is gap insurance, and is gap insurance worth it?
What is gap insurance and how does it work?
Gap insurance, broadly speaking, is an additional layer of protection should you get into an accident and write your car off. Gap insurance financially bridges the gap between what your insurance will pay compared to what you actually paid or the amount you have left on a loan agreement.
There are 3 main types of gap insurance available in the UK. The first is ‘back to invoice’ insurance where your gap insurance will pay the difference between what your main insurance will pay and the original amount you paid for the car or the amount that will still be owed on a lease agreement.
The second type is ‘vehicle replacement’ gap insurance which should be taken out to ensure you get the total amount to buy a brand-new version of your vehicle. If your car was a used car, however, this will bump you up to your original purchase price.
Finally, there is ‘contract gap’ insurance which is only available for people who have a lease agreement with no option to buy their car. In this scenario, the gap insurance will cover any payments left on the lease.
The importance of gap insurance in protecting car owners
One reason why gap insurance is so beneficial is when something completely unexpected happens, like a theft or write-off. For example, if you purchased a car worth £10,000 and it was stolen it would not be worth £10,000 any more. If at the time it was worth £8,000 that is all your main insurers will pay out. This is where gap insurance comes in and makes up the difference, so you are fully reimbursed.
In 2022, the value of gap insurance claims rose by 24% which shows that more drivers are purchasing and benefiting from gap insurance.
Benefits of having gap insurance in the UK market
With the UK automotive industry evolving quickly, the latest technology that is included when you purchase a car can push the prices up. Having peace of mind that you will get what you paid for the car back in the event of an accident or theft will help you to keep ahead of your finances.
