Buying a new 2019 motor? Mind the car insurance gap!

You may have insurance for your new car, but it’s important to consider the financial impact if your car was written off in future

Young woman sitting in new car with key in showroom

The new ‘19’ number plates have just been released, but if you’re planning on buying up a new car this spring, make sure you’re covered against any nasty surprises.

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Although you may already have thought about insurance for your new car, it’s important to consider the financial impact if your car was written off in future.

A car’s value will begin to depreciate the second you drive it off the forecourt, and insurance will only cover the value of your car at the time you make a claim.

That means if something happens to your car in a few years’ time when it’s worth much less than you paid for it, your insurer will only reimburse you for the current market value.

How GAP cover can help

Many motorists take out Guaranteed Asset Protection (GAP) cover alongside new cars, specifically to cover any difference between the amount their insurer might pay out if the car is stolen or declared a total loss, and the amount they paid for it.

For example, if you paid £19,000 for your car and it is written off five years later when its value has fallen to £10,000, GAP cover would pay out the £9,000 difference between the insurance pay out and the original value of the car.

The benefit of this is that you’ll be able to replace your car with an equivalent new model, whereas if you only had the £10,000 pay out from your insurer, you’d have to look at a much cheaper alternative, or buy a second-hand car.

Duncan McClure Fisher, founder of MotorEasy which provides car repair and maintenance products and services, said: “Any GAP pay-out will help you settle any outstanding hire purchase or personal contract purchase (PCP) agreement on the vehicle. GAP cover is also available if your vehicle is on a contract hire or leasing agreement and these policies pay the difference between the motor insurers’ total loss figure and the outstanding rentals required by the leasing company.”

Different types of GAP cover

There are different types of GAP policy available, so it’s important to research which kind of policy will best suit your needs.

For example, Return to Invoice (RTI) cover will, in the event of a write-off or total loss, pay the difference between the amount your car insurer pays out and the original invoice price you paid for the car.

If your car is older or you’ve lost your invoice, Return to Value (RTV) cover will make up the difference between the insurer’s pay-out and the guide value of your car when you bought the cover.

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Remember that standalone policies are often much cheaper than buying from a dealership. Mr McClure Fisher said; “Car dealers keep massive margins on this type of cover and by buying direct, you can save up to 75% of the dealer price, with costs starting from as little as £120 a year.”