bit of help

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dawal6
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bit of help

Post by dawal6 » Sat Dec 02, 2017 3:53 pm

got a 340i, £25,400 paid for it on 4 year pcp, so want cover for 4 years, what value do i put on policy claim limit as unsure what that means please

thanks

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Re: bit of help

Post by GapInsurance.co.uk » Mon Dec 04, 2017 10:58 am

dawal6 wrote:
Sat Dec 02, 2017 3:53 pm
got a 340i, £25,400 paid for it on 4 year pcp, so want cover for 4 years, what value do i put on policy claim limit as unsure what that means please

thanks
Hi - The claim limit refers to the most that the policy would be prepared to pay out (in addition to that which you receive from your motor insurer) towards either the original invoice price you bought it for (Invoice GAP insurance) or, what it would cost at the time of claim to replace your vehicle with an equivalent to the vehicle you originally purchased (Replacement GAP insurance).

It's not an exact science but, a normally good way of determining a minimum claim limit to choose would be as follows:

Invoice GAP insurance:

Take the price that you're paying to put the vehicle on the road today (after discount but before deduction of deposits and/or addition of any finance & interest charges) and deduct from that, the sum of the large/balloon repayment you'd have to pay at the end of the PCP term if you were to elect to keep the vehicle.

Replacement GAP insurance:


Take the price you *would* have paid had you received no discount whatsoever (e.g. in the case of a brand new vehicle, this would be the full list price according to the manufacturer's price list for your vehicle and any corresponding spec' options) and deduct from that, the same sum of the large/balloon repayment due at the end of the PCP term.

In the case of either policy type, you should choose a claim limit that is at the very least equal to the amounts arrived at using the calculations above. How much higher you go is really a matter of personal preference but, keep in mind that with Replacement GAP insurance it's normally better to have a higher claim limit than on an Invoice GAP insurance policy because you've also got allow for the replacement cost of an equivalent vehicle increasing over time (as opposed to Invoice GAP insurance which only has to concern itself with by how much your car depreciates).

The process above only really gets skewed if you've left a particularly large deposit as part of the PCP agreement in which case the final/balloon repayment isn't always a tru reflection of what the finance company think the car is going to be worth at the end of the PCP term.

Another school of thought is that the average vehicle is expected to depreciate (assuming average mileage of circa 12k per year) by at least 50% over a 3yr period and possibly as much as 70%. Thus for a 4yr GAP insurance policy duration it'd be prudent to have a claim limit that's closer to 70% of the original price paid than 50%.

Alternatively, pay a little extra and go for an "Unlimited" claim limit and avoid the "headache" of trying to guess how much you might need :D

If you want to discuss your own requirements in more detail, please give us a shout on 01484 490095 or drop us an email to support@gapinsurance.co.uk.

Best wishes

David
Invoice, Replacement & Contract Hire GAP Insurance quotes at up to 85% less than your Motor Dealer
T: 01484 490095 E: support@gapinsurance.co.uk W: gapinsurance.co.uk F: facebook.com/gapinsurance

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