Gap Insurance = scam. Or am I missing something?

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Been out shopping for a nearly new car, and every dealer tried really hard to flog me Gap Insurance. Doesn’t the very existence of this product mean insurance companies are effectively admitting that the book value the pay for your car doesn’t match the actual replacement cost, in which case they are scamming you by selling you insurance that doesn’t actually do what it says?

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Mr Tidy said:

I got flamed on a previous thread a while ago for suggesting it was!

But to be fair I think it has a place for people using finance to ensure they don't end up having to make up a shortfall between the insurance pay-out and the balance of the finance - but then I didn't use finance for mine!

At the end of the day insurers are only in business to make a profit, so if you have average luck you should be better off saving the cost.

I can definitely see the point if you’re getting a car on finance or any of the rental-by-another-name schemes as you don’t want to be left paying for a car you don’t have, but like you I didn’t take finance.

I was tempted, having been badly ripped off by my previous insurer when my car got written off by a woman in a massive SUV who was too busy being on the phone to realise the traffic in front of her had stopped. The offered value was 40% less than the replacement cost so I argued that the book value was bks as all the similar spec/age/mileage cars on Autotrader were nowhere near what they were offering ... in the end I settled for only 30% less than what it would cost me to replace the car ... in an accident that wasn’t my fault. So yeah, insurance companies are generally bds.

My attitude to risk is generally to be one of the lucky ones, and when I’m not then I have a credit card. That’s why I don’t have boiler insurance, insurance against the dog knocking over my telly, and so on. Over the years I’ve saved enough on my boiler insurance to buy a new boiler if it breaks, so generally it works for me.

I get why those policies exist, and you’re insuring a genuine risk so that’s fine. I don’t understand how car insurance companies get away with this tacit admission that they insure your car but they will rip you off if you need to claim unless you take this other additional product.

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janesmith1950 said:

think you're misunderstanding general car insurance. It's there to put you back in the position you were in immediately before the loss. If your car was by then 3 years old, it's hardly putting you back in the position you were in by buying you a new one. The risk of depreciation is yours as car buyer, however you buy it. If you want to insure against depreciation in a total loss scenario, buy Gap insurance.

It’s not about depreciation, in my example I bought the car at 8 years old, got written off at 10 years old. Insurance eventually paid out 30% less than it would cost me to buy another 10 year old car. For an accident that wasn’t my fault.

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In my case the book value didn’t match the market value, even after I negotiated and appealed the offer, and I’m not the only one. It wasn’t anything exotic, just an Audi estate. That’s what seems dodgy to me.

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It’s not - for me at least - anything to do with depreciation. If I have a three year old car which is written off I expect enough money to buy another three year old car. In my experience that’s not what happens as the book value of my Audi was nowhere near the cost.