Car Gap insurance is a policy you buy in the hope that you will never need it. After all no-one ever plans to have their vehicle stolen or be involved in an accident, yet it happens to thousands and thousands of us day in and day out.
The whole nature of gap insurance is that it is a top up insurance used to fill in the gaps made by your own insurance company and leave you with no financial shortfall. Depending upon the level of cover that you have chosen it can simply pay the difference between your own vehicles valuation and any outstanding finance, the invoice price you paid or even the replacement cost if it has gone up.
So what happens when you make a claim and there is still a shortfall?
There can be many reasons that at there could still be a short-fall such as financial arrears and late payment charges. But in most cases it boils down to some very intricate rules of insurance. These rules are known as subjugation and contribution. These rules in brief mean that both insurance companies should act fairly and pay their fair share of any claim. Nothing more and nothing less.
For example if your car is written off and your own insurance company who let's be completely honest are a business offer you a price in settlement of your vehicle they should in theory offer you a fair price. This price is in most cases based on a guide price, or a percentage of one. In the UK this guide price is normally based on glass' guide. Your Gap insurance company will again in ninety-nine percent of cases use the same guide to value your vehicle and pay any shortfall.
In theory this means that here should never be any shortfall however as we have already discussed your motor insurance company is a business and it is in their interests to offer you a lower price in the hope that you will accept it.
Your gap insurance policies aim is to pay only from the guide price. This means that if you have already accepted an offer which is lower than the fair market value your policy will not cover it.
So who is to blame your motor insurance company or your gap insurance company?
Although this can vary the beauty of having a gap insurance policy is that you will have access to the prices and in most cases your gap insurance company will aid and do everything they can to make sure that your own insurance company pay a fair amount. Ensuring that they do not simply see that you have gap insurance as a scape goat to lowering their offer.
So is gap insurance the root of all evil well no I don't think so. Equally just because you have additional protection should not mean that they are now liable for any shortfall that your own insurance company under pay you.
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