What is the right gap insurance claim limit?

Honda /Hayabusa rival

There is actually no right answer to which gap insurance claim limit you should choose. Nobody knows for sure how much a vehicle is going to be worth in a certain amount of time, so nobody can predict exactly what the right claim limit is. Therefore the best thing we can do, is take everything into account, such as average depreciation, the economy, styles and fashion, to pick a claim limit that will perform if a vehicle is written off or stolen.

A number of factors to think about with your gap insurance claim limit?

There are a number of things that affect vehicle value and how much a vehicle will be worth in a particular amount of time. Of course, appreciation and depreciation of vehicles, the economic climate, current rates and public opion. Therefore your gap insurance claim limit decision should be based on an amount that should cover you, once you have taken everything into account.

The claim limit of a gap insurance policy is an extremely vital part of your protection. It essentially forms the upper limit to any gap insurance claim that you ever make. In short, this meant that the claim limit is the maximum amount you will receive if you ever make a claim. This of course means that if your gap insurance claim limit is not big enough to perform, then you could find yourself out of pocket.

If you are buying gap insurance online or over the phone, ensure that the person you are talking to explains which gap insurance claim limits are available to you. Feel free to ask questions and advice over the phone and ensure that you have been provided with a big enough gap insurance claim limit to perform if the worst was to happen.

An example of how your gap insurance claim limit will perform?

Lets take a look at an example. If you were to take out a 4 year return to invoice gap insurance policy on your vehicle, which cost £16,000 and you took out a £10,000 claim limit. Lets imagine that you are three years into your gap insurance cover and due to car depreciation, your vehicle now has a market value of £7,000. This is therefore the amount that your own motor insurance will award you, if your vehicle happens to be written off or stolen. This means that to be returned to your invoice price, you have a shortfall of £9,000 once you have received your motor insurance payment. Your gap insurance claim limit is £10,000 and therefore big enough to perform. This is a sufficient claim limit. If your car had dropped further in value to say £5,000, then your shortfall would have been £11,000 and you would still be £1,000 out of pocket.

Different gap insurance claim limits are likely to be needed depending on which type of gap insurance you are purchasing. For example, finance gap insurance is only covering your outstanding finance balance and therefore a smaller claim limit is likely to be sufficient. A vehicle replacement policy may need a little bit more room to manoeuvre, as this is covering the cost of buying the same standard of vehicle again, which due to vehicle appreciation, is likely to be more than you originally paid.

For example if you bought a car for £20,000 and 3 years later your car was stolen, if your car was valuated at £10,000. The equivalent model 3 years later is now more expensive at £23,000, then you would need £13,000 on top of your motor insurance valuation to be able to achieve this new vehile. Therefore a claim limit bigger than the £13,000, such as £15,000 is necessary to be able to cover you to do this.

As it has been explained, you can take out gap insurance for the same vehicle and the same amount of time, though the claim limit could be different depending on your particular needs. The limit that you decide on is always your decision and although it may seem like a confusing one, just considering your length of cover, particular circumstances and considering the world we live in, along with the type of cover you are looking for, should lead you to make a truly sufficient decision on your gap insurance claim limit.


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