GAP insurance pondering
Discussion
TwigtheWonderkid said:
Why does it matter?
1. You have a comp policy that gives new for old replacement in year 1 if car is written off.
2. Your car is written off in year 1.
3. You claim from your policy.
4. They give you a new car.
THAT'S WHERE THE STORY ENDS FOR YOU.
However, there may be other stuff after that.
5. You insurers ask tp insurers to pay them £30K, the amount they paid buying you a new car.
6. TP insurers say no, car was only worth £25 as it was 6 months old.
7. Row between insurers.
ALL OF WHICH IS NOT YOUR PROBLEM.
silentbrown said:
nottyash said:
How did your parents owe £2000 more than 2 years previous when they bought it?
Mazda 3 are known to depreciation so you were lucky with £15k, because on auto trader you won't pay more than £9k for a 2014 model.
What's the 3rd party insurance? Your entitled to everything back in a non fault claim. It's irrelevant if the person who hits you is only 3rd party insurance, it means your covered.
You're confused about Gap insurance. There are many different kinds. Mazda 3 are known to depreciation so you were lucky with £15k, because on auto trader you won't pay more than £9k for a 2014 model.
What's the 3rd party insurance? Your entitled to everything back in a non fault claim. It's irrelevant if the person who hits you is only 3rd party insurance, it means your covered.
Finance Gap (just covers finance shortfall)
Return To Invoice Gap (Would have paid £23K - £15K in this case)
Vehicle Replacement Gap (which poster above obviously had)
The GAP insurance allows them to claim the difference between this valuation and the cost of the new replacement (9k)
It's all quite straightforward
As I recall the GAP insurance was £300 for three years.
JQ said:
TwigtheWonderkid said:
Why does it matter?
1. You have a comp policy that gives new for old replacement in year 1 if car is written off.
2. Your car is written off in year 1.
3. You claim from your policy.
4. They give you a new car.
THAT'S WHERE THE STORY ENDS FOR YOU.
However, there may be other stuff after that.
5. You insurers ask tp insurers to pay them £30K, the amount they paid buying you a new car.
6. TP insurers say no, car was only worth £25 as it was 6 months old.
7. Row between insurers.
ALL OF WHICH IS NOT YOUR PROBLEM.
You would have an excess on your policy, so when your insurer went to supply you with your new car, you'd have to contribute the excess, £100, £250 or whatever. You'd be able to claim that in it's entirety from the tp insurer. Having made a 100% recovery of your own losses, your insurer would not reduce your no claims bonus or class the claim as partial fault if they couldn't recover their entire outlay for whatever reason.
In the same way as in a non fault accident, your insurer can recover their outlay, but not admin costs of handling your claim. Every claim you make from your insurers costs your insurers, even when they make a full recovery of their outlay.
Hi all
I'm so confused by GAP insurance (when used with PCH leasing) that I've created a PH account today to ask this question on this thread. I should have created one years ago to be honest the amount I browse the forums anonmymously!
I've recently signed up to (what I think is) a very competitive PCH lease deal for an Audi S4. The deal details are; 24 month contract, 8000 miles, £375 per month, with a £1125 deposit in month 1.
This holds me to a total of just £9750 over the 2 year agreement. This is all I am held accountable for providing the car is not written off and is handed back in good condition etc.
Now, off the top of my head, the car is actually worth £45k. I acknowledge that the car dealers get better deals etc. but this is the market value of the car when brand new.
I am just about to finish a previous lease car (208 GTI), which is half the price, and I did not take out GAP insurance, purely out of ignorance really.
Now, let's base the following questions on me definitely writing off the car 12 months in (just to irradicate the "risk" point of views).
Do any of you guys recommend I take out GAP insurance on this deal I have? And if so, what type? I most certainly want to protect my deposit but should I go for 'Return to Invoice' for example, or another type?
If you don't think I should take out GAP insurance, even with a crash in mind, based on the fact that I'm only accountable for £9750... please give your reasons.
Thanks in advance
Mike
I'm so confused by GAP insurance (when used with PCH leasing) that I've created a PH account today to ask this question on this thread. I should have created one years ago to be honest the amount I browse the forums anonmymously!
I've recently signed up to (what I think is) a very competitive PCH lease deal for an Audi S4. The deal details are; 24 month contract, 8000 miles, £375 per month, with a £1125 deposit in month 1.
This holds me to a total of just £9750 over the 2 year agreement. This is all I am held accountable for providing the car is not written off and is handed back in good condition etc.
Now, off the top of my head, the car is actually worth £45k. I acknowledge that the car dealers get better deals etc. but this is the market value of the car when brand new.
I am just about to finish a previous lease car (208 GTI), which is half the price, and I did not take out GAP insurance, purely out of ignorance really.
Now, let's base the following questions on me definitely writing off the car 12 months in (just to irradicate the "risk" point of views).
Do any of you guys recommend I take out GAP insurance on this deal I have? And if so, what type? I most certainly want to protect my deposit but should I go for 'Return to Invoice' for example, or another type?
If you don't think I should take out GAP insurance, even with a crash in mind, based on the fact that I'm only accountable for £9750... please give your reasons.
Thanks in advance
Mike
maclarkk said:
If you don't think I should take out GAP insurance, even with a crash in mind, based on the fact that I'm only accountable for £9750... please give your reasons.
Ask ALA - they're usually helpful on here and offer a 12% PH discount. https://www.pistonheads.com/gassing/topic.asp?h=0&...They also have a specific product for lease cars. https://www.ala.co.uk/gap-insurance/contract-hire-...
I'd recommend you take GAP insurance. Your normal policy may offer as-new-replacement in the first year - BUT only if you're the registered keeper of the vehcile, which you won't be with a lease.
Not that GAP helps here, but always remember there are situations where you're accountable for the entire value of the vehicle if insurance won't pay out. (e.g drink-driving)
CaptainCosworth said:
Not sure how it's open to fraud? I had the benefit of claiming on GAP insurance a few years ago. Paid £10k for a car which was written off 2 1/2 years later. Insurance paid out market value (£6.5k) and the GAP insurer paid out £3.5k. Other than a bit of middle-man negotiation by me between the 2 insurance companies over the market value I can't see any potential for fraud?
For the sake of about £200 I would always take out GAP insurance. In the case above it meant I had £10k to go and get a replacement car. Yes, I could have got like-for-like with £6.5k, but in reality it won't be like for like. I'd bought my £10k car when it was a year old (so only a year of 'unknowns'), whereas a £6.5k like-for-like would have had 3 1/2 years of 'unknowns'.
So you ran a car for 2.5 years and got your £10k back - Id call that a result. Wish we could all go that long and get reimbursed with zero depreciation taken into account - seems odd to me though.For the sake of about £200 I would always take out GAP insurance. In the case above it meant I had £10k to go and get a replacement car. Yes, I could have got like-for-like with £6.5k, but in reality it won't be like for like. I'd bought my £10k car when it was a year old (so only a year of 'unknowns'), whereas a £6.5k like-for-like would have had 3 1/2 years of 'unknowns'.
swagmeister said:
CaptainCosworth said:
Not sure how it's open to fraud? I had the benefit of claiming on GAP insurance a few years ago. Paid £10k for a car which was written off 2 1/2 years later. Insurance paid out market value (£6.5k) and the GAP insurer paid out £3.5k. Other than a bit of middle-man negotiation by me between the 2 insurance companies over the market value I can't see any potential for fraud?
For the sake of about £200 I would always take out GAP insurance. In the case above it meant I had £10k to go and get a replacement car. Yes, I could have got like-for-like with £6.5k, but in reality it won't be like for like. I'd bought my £10k car when it was a year old (so only a year of 'unknowns'), whereas a £6.5k like-for-like would have had 3 1/2 years of 'unknowns'.
So you ran a car for 2.5 years and got your £10k back - Id call that a result. Wish we could all go that long and get reimbursed with zero depreciation taken into account - seems odd to me though.For the sake of about £200 I would always take out GAP insurance. In the case above it meant I had £10k to go and get a replacement car. Yes, I could have got like-for-like with £6.5k, but in reality it won't be like for like. I'd bought my £10k car when it was a year old (so only a year of 'unknowns'), whereas a £6.5k like-for-like would have had 3 1/2 years of 'unknowns'.
TwigtheWonderkid said:
swagmeister said:
CaptainCosworth said:
Not sure how it's open to fraud? I had the benefit of claiming on GAP insurance a few years ago. Paid £10k for a car which was written off 2 1/2 years later. Insurance paid out market value (£6.5k) and the GAP insurer paid out £3.5k. Other than a bit of middle-man negotiation by me between the 2 insurance companies over the market value I can't see any potential for fraud?
For the sake of about £200 I would always take out GAP insurance. In the case above it meant I had £10k to go and get a replacement car. Yes, I could have got like-for-like with £6.5k, but in reality it won't be like for like. I'd bought my £10k car when it was a year old (so only a year of 'unknowns'), whereas a £6.5k like-for-like would have had 3 1/2 years of 'unknowns'.
So you ran a car for 2.5 years and got your £10k back - Id call that a result. Wish we could all go that long and get reimbursed with zero depreciation taken into account - seems odd to me though.For the sake of about £200 I would always take out GAP insurance. In the case above it meant I had £10k to go and get a replacement car. Yes, I could have got like-for-like with £6.5k, but in reality it won't be like for like. I'd bought my £10k car when it was a year old (so only a year of 'unknowns'), whereas a £6.5k like-for-like would have had 3 1/2 years of 'unknowns'.
A few facts to consider from someone in the know...;)
Yes, RTI GAP is subject to fraud and any claim in the last few months will be very thoroughly investigated! But, it's a great backstop especially for leasing or balloon payment HP.
Don't EVER buy from a dealer. Mark ups vary but generally the insurers provide the cover 'net' either direct to the dealer or via the manufacturer. This can then be retailed at whatever price they like (generally, some impose limits). Commissions of 80% of the final price are not unheard of. And because Insurance Premium Tax on GAP is charged at the higher rate of 25%, these high commissions also produce a big chunk of IPT.
Direct policies are just as good and generally underwritten by the same insurers - there are not many in this market.
If you want to do the maths and take the risk, the average claims incidence across the comprehensively insured vehicles in the UK is 2% per year. Of course, this is an average across millions and ignores car type, mileage, location and your driving style.
Yes, RTI GAP is subject to fraud and any claim in the last few months will be very thoroughly investigated! But, it's a great backstop especially for leasing or balloon payment HP.
Don't EVER buy from a dealer. Mark ups vary but generally the insurers provide the cover 'net' either direct to the dealer or via the manufacturer. This can then be retailed at whatever price they like (generally, some impose limits). Commissions of 80% of the final price are not unheard of. And because Insurance Premium Tax on GAP is charged at the higher rate of 25%, these high commissions also produce a big chunk of IPT.
Direct policies are just as good and generally underwritten by the same insurers - there are not many in this market.
If you want to do the maths and take the risk, the average claims incidence across the comprehensively insured vehicles in the UK is 2% per year. Of course, this is an average across millions and ignores car type, mileage, location and your driving style.
M3DGE said:
A few facts to consider from someone in the know...;)
Yes, RTI GAP is subject to fraud and any claim in the last few months will be very thoroughly investigated! But, it's a great backstop especially for leasing or balloon payment HP.
Don't EVER buy from a dealer. Mark ups vary but generally the insurers provide the cover 'net' either direct to the dealer or via the manufacturer. This can then be retailed at whatever price they like (generally, some impose limits). Commissions of 80% of the final price are not unheard of. And because Insurance Premium Tax on GAP is charged at the higher rate of 25%, these high commissions also produce a big chunk of IPT.
Direct policies are just as good and generally underwritten by the same insurers - there are not many in this market.
If you want to do the maths and take the risk, the average claims incidence across the comprehensively insured vehicles in the UK is 2% per year. Of course, this is an average across millions and ignores car type, mileage, location and your driving style.
When you say "someone in the know" that implies that you know what you're talking about.Yes, RTI GAP is subject to fraud and any claim in the last few months will be very thoroughly investigated! But, it's a great backstop especially for leasing or balloon payment HP.
Don't EVER buy from a dealer. Mark ups vary but generally the insurers provide the cover 'net' either direct to the dealer or via the manufacturer. This can then be retailed at whatever price they like (generally, some impose limits). Commissions of 80% of the final price are not unheard of. And because Insurance Premium Tax on GAP is charged at the higher rate of 25%, these high commissions also produce a big chunk of IPT.
Direct policies are just as good and generally underwritten by the same insurers - there are not many in this market.
If you want to do the maths and take the risk, the average claims incidence across the comprehensively insured vehicles in the UK is 2% per year. Of course, this is an average across millions and ignores car type, mileage, location and your driving style.
What's the source for saying GAP is taxed at 25%?
And 2% claims incidence on car insurance? Maybe there's some weird way of looking at the stats but the number of claims is more like 10x that.
Sheepshanks said:
When you say "someone in the know" that implies that you know what you're talking about.
What's the source for saying GAP is taxed at 25%?
And 2% claims incidence on car insurance? Maybe there's some weird way of looking at the stats but the number of claims is more like 10x that.
Yes but not all of those claims will be total losses.What's the source for saying GAP is taxed at 25%?
And 2% claims incidence on car insurance? Maybe there's some weird way of looking at the stats but the number of claims is more like 10x that.
Sheepshanks said:
M3DGE said:
A few facts to consider from someone in the know...;)
Yes, RTI GAP is subject to fraud and any claim in the last few months will be very thoroughly investigated! But, it's a great backstop especially for leasing or balloon payment HP.
Don't EVER buy from a dealer. Mark ups vary but generally the insurers provide the cover 'net' either direct to the dealer or via the manufacturer. This can then be retailed at whatever price they like (generally, some impose limits). Commissions of 80% of the final price are not unheard of. And because Insurance Premium Tax on GAP is charged at the higher rate of 25%, these high commissions also produce a big chunk of IPT.
Direct policies are just as good and generally underwritten by the same insurers - there are not many in this market.
If you want to do the maths and take the risk, the average claims incidence across the comprehensively insured vehicles in the UK is 2% per year. Of course, this is an average across millions and ignores car type, mileage, location and your driving style.
When you say "someone in the know" that implies that you know what you're talking about.Yes, RTI GAP is subject to fraud and any claim in the last few months will be very thoroughly investigated! But, it's a great backstop especially for leasing or balloon payment HP.
Don't EVER buy from a dealer. Mark ups vary but generally the insurers provide the cover 'net' either direct to the dealer or via the manufacturer. This can then be retailed at whatever price they like (generally, some impose limits). Commissions of 80% of the final price are not unheard of. And because Insurance Premium Tax on GAP is charged at the higher rate of 25%, these high commissions also produce a big chunk of IPT.
Direct policies are just as good and generally underwritten by the same insurers - there are not many in this market.
If you want to do the maths and take the risk, the average claims incidence across the comprehensively insured vehicles in the UK is 2% per year. Of course, this is an average across millions and ignores car type, mileage, location and your driving style.
What's the source for saying GAP is taxed at 25%?
Sheepshanks said:
He didn't say it was.
Quick bit of Googling suggests GAP claims ratio is 10%. I have to say that's far higher than I expected, especially bearing in mind that the real (not dealer) price is pretty low.
10% claims ratio doesn't mean 10% of policies have a claim. It means for every £100 collect in premium, they pay out £10 in claims. So very profitable. To achieve those figures, the percentage of buyers claiming may be around 1%, if say the average claim eats up about 10 people's premiums. Quick bit of Googling suggests GAP claims ratio is 10%. I have to say that's far higher than I expected, especially bearing in mind that the real (not dealer) price is pretty low.
TwigtheWonderkid said:
10% claims ratio doesn't mean 10% of policies have a claim. It means for every £100 collect in premium, they pay out £10 in claims. So very profitable. To achieve those figures, the percentage of buyers claiming may be around 1%, if say the average claim eats up about 10 people's premiums.
Thanks - that sounds about right and in fits in with what I expected. GAP claims are pretty rare.It was his statement "the average claims incidence across the comprehensively insured vehicles in the UK is 2% per year" that baffles me. Like I said, maybe there's some weird way of looking at it, but as it's written that can't be correct.
I can only guess he does mean 2% for write offs. Although as he also confidently gave the wrong tax percentage, who knows?
Ozzie Osmond said:
1. Cars depreciate. I can't see any point trying to insure depreciation!
2. However, sometimes when a car is stolen there may be more money owing on finance or whatever than the value of the car at the time it is lost. Gap insurance will usefully make good the difference under those circumstances.
This is forgetting the fact that I'd far rather own a 100,000+ mile car that I'd owned from new/nearly new, than finding a replacement 100,000 car. If I plan to own a car for 10 years, I don't want to be shopping around for an equivalent replacement with somebody else's farts after just 5 years, and my finances wouldn't be prepared to buy a new/nearly new car prematurely at that time either.2. However, sometimes when a car is stolen there may be more money owing on finance or whatever than the value of the car at the time it is lost. Gap insurance will usefully make good the difference under those circumstances.
Sheepshanks said:
TwigtheWonderkid said:
10% claims ratio doesn't mean 10% of policies have a claim. It means for every £100 collect in premium, they pay out £10 in claims. So very profitable. To achieve those figures, the percentage of buyers claiming may be around 1%, if say the average claim eats up about 10 people's premiums.
Thanks - that sounds about right and in fits in with what I expected. GAP claims are pretty rare.It was his statement "the average claims incidence across the comprehensively insured vehicles in the UK is 2% per year" that baffles me. Like I said, maybe there's some weird way of looking at it, but as it's written that can't be correct.
I can only guess he does mean 2% for write offs. Although as he also confidently gave the wrong tax percentage, who knows?
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