If you are involved in a road traffic accident and your car is written off or your vehicle is stolen and never to be seen again or is found in a burnt-out condition then you will no doubt be quickly going to submit a claim on your car insurance policy. In many situations, your insurer will only pay out a sum equating to the vehicle’s current market value. Guaranteed Asset Protection (Gap) insurance is designed to cover the shortfall.
For instance, let us say that you purchased a new vehicle for say £20,000 in cash and two years later it is written off following a road traffic accident and, after depreciation, is only worth say £10,000 then the GAP insurer will pay out the shortfall of £10,000 enabling you to buy a new car to the value of £20,000 rather than have to possibly look for say a used car costing say £10,000.
If you had bought that car on finance and borrowed say the whole amount over 5 years then you may find that you still owe the finance company say £16,000. If you were only offered £10,000 by the car insurance company then you would have a shortfall of £6,000 on you finance arrangement. The GAP insurance could be used to liquidate this liability rather then you be left with a significant debt that you would need to come to an arrangement with the lender to repay.
There are many companies that provide Gap insurance so, as with motor insurance, you may wish to do your research and obtain a number of quotes perhaps by using the likes of a price comparison website. This is something that you can do from the comfort of your home 24/7. As with car insurance, you should read the terms and conditions of Gap insurance to make sure that you are happy with the product and that you believe it would be potentially beneficial based upon your personal circumstances.