Is gap insurance something that’s only flogged by cheeky salesmen eager to milk a little extra money out of you or is it a legitimate option? If it’s been offered to you and you’re unsure whether or not to accept then you’ve come to the right place. But first, let’s get behind exactly what gap insurance is.
How does gap insurance work?
The gap in the title refers to the gap between the amount your insurer pays you in the event of an accident and the amount you actually paid for the car. Given the fact that a new car’s value drops by around a third as soon as it leaves the forecourt, it’s obviously an option that makes more sense for those buying a brand new vehicle.
Should you get it for your business vehicle?
Well, that depends on your business and your finances, more than anything. It’s rarely essential, as your car insurance should pay out for a replacement car of the same age and condition anyway in the event you write a car off. However, there are situations where gap insurance might prove tempting.
You should get gap insurance if
You want a new car – If you will only settle for brand new cars, rather than just like-for-like models, then it’s really the only option. For certain businesses, this might be worth considering, as brand new cars always look good for the brand.
You’ve bought the car on finance – If you’re paying back the cost of your cars with a personal loan then gap insurance is a viable option. This is because if they are stolen or written off, you’ll only be offered the value they are currently worth and you’ll still be left paying off the amount you paid for them.
You should NOT get gap insurance if
You’re not bothered about brand new cars – If you are happy with your current cars and are happy with getting the same cars like-for-like in the event of a theft or serious accident, gap insurance simply isn’t worthwhile.
You have fully comprehensive insurance – Comprehensive cover generally includes new car replacement as part of the policy, at least in the first year or two.
You’re buying used cars – While some dealers do offer gap insurance it’s honestly a waste of time if you’re buying secondhand because the gap between what you paid and what the insurer will Pau out is likely to be inconsequential.