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Understanding the Impact of Vehicle Mileage on GAP Insurance
If this is the first time you have encountered the subject, GAP Insurance can initially seem daunting. Like all forms of insurance, it is essential to understand the benefits and features. One area that is often questioned is the impact of mileage on your GAP policy.
In this comprehensive guide, we'll delve into this topic, shedding light on the relationship between GAP Insurance and vehicle mileage. We look at how mileage can affect your GAP coverage and what you need to know to ensure you're adequately protected.
GAPInsurance123 is one of the long-established independent GAP Insurance providers in the UK. As such, we hope you will benefit from our experience and knowledge better to understand the impact of mileage on your GAP Insurance.
The Role of Vehicle Mileage in GAP Insurance
Consequences of Exceeding Maximum Mileage
The Impact of High Mileage on GAP Insurance
Types of GAP Insurance and Their Relation to Mileage
How to Choose the Right GAP Insurance Policy Considering Mileage
Introduction to GAP Insurance
So what is GAP Insurance, or Guaranteed Asset Protection, as it is also known?
GAP Insurance is a type of cover that can top up your car insurance settlement if the vehicle is written off or stolen. That can be after a fire, flood, theft or accident.
The motor insurer settlement may only be for the market value when the vehicle is written off. This may be far less than the car's original value or what may be outstanding on a lease or loan arrangement.
Depending on which type of GAP Insurance is in place, the cover can top up the motor insurer's settlement back to the original price or value of the vehicle, its replacement cost or the amount outstanding on a finance agreement.
The Role of Vehicle Mileage in GAP Insurance
When it comes to GAP cover, vehicle mileage plays a crucial role. It's a factor that can influence the terms of your policy, the cost, and even the payout in case of a claim. 
This can be both in terms of the recorded mileage when you buy GAP Insurance coverage and the mileage you cover during the policy term.
Maximum Mileage for GAP Insurance
Mileage limits can come in two different forms with GAP Insurance.
Maximum mileage at inception
Most GAP products will have a maximum mileage that can be covered on the day you purchase the policy. This will vary between products and providers; you must check the limit.
You may invalidate any future GAP Insurance claim if your vehicle exceeds these limits.
It should also be noted that these caps may only be in place when you start the GAP cover. So if the maximum recorded mileage is 80,000 at the start of the policy, as long as your vehicle is below that, then you are eligible to buy the policy on that basis.
Should you see the recorded mileage go over the 80,000 mark over that time, that will not invalidate any future claim in most cases.
Annual Mileage Cap in GAP Insurance
Some GAP policies also have an annual mileage cap. This means that your coverage could be affected if you exceed a certain number of miles in a year.
It tends to appear on a Lease and Contract Hire GAP policy where a 20,000 mile-a-year cap is typical. This will be fine for most leased vehicles, as 20,000 miles a year is high anyway.
However, this isn't a standard feature of all GAP products, so it's essential to read the terms and conditions of your policy carefully.
Consequences of Exceeding Maximum Mileage
Like all insurance products, your GAP products will have terms and conditions. A maximum mileage cap may be one of them.
Suppose you exceed the maximum mileage limit on your GAP Insurance policy. In that case, you may not receive the full payout or even invalidate your claim entirely in the event of a total loss.
For example, if you state your used vehicle had 75,000 miles 'on the clock' when you bought the car when it had 85,000 miles, then your GAP claim could run into trouble. Mileage can be recorded at an MOT test or on the sales invoice for the vehicle and can easily be verified.
The Impact of High Mileage on GAP Insurance
You may be interested to understand why mileage is enough of a concern for underwriters to put mileage limits into the terms and conditions of the GAP cover. However, high mileage can impact your GAP Insurance in several ways.
Firstly, high mileage can decrease the value of your vehicle, which could increase the 'gap' the underwriters will pay if you make a claim.
Secondly, a higher mileage means you are on the roads more, increasing the chance you could be involved in an accident.
Whilst a vehicle can depreciate in value, the cost of repairing it will not. Car insurance providers will use a calculation based on the cost of the repair compared, as a percentage, against the current market value of the vehicle.
The more the car depreciates, the higher the percentage cost of the repair will get. In turn, the greater chance the car insurer will write off the vehicle following an accident. A write-off will trigger a claim and a potential GAP Insurance payout.
Combining a faster depreciating vehicle and a higher chance you could make a claim is not a mix that will help underwriters sleep at night!
Types of GAP Insurance and Their Relation to Mileage
There are several types of GAP Insurance; each may have its own set of rules regarding mileage.
Vehicle Replacement GAP Insurance
Vehicle Replacement GAP Insurance covers the difference between your car insurance payout and the cost of an equivalent replacement vehicle. If the vehicle you purchase is brand new, then it is the cost of a brand new replacement at the time of the claim. This is even if the replacement cost is higher than the one you first purchased.
This type of policy is best suited to brand-new car purchases as these purchases can often be driven by a discount. A similar deal cannot be guaranteed when a claim is made so that VRI GAP can cover the difference in the increased replacement cost.
As VRI GAP is best suited to new vehicles, some GAP underwriters only allow it to be sold on new cars. This means VRI cover may have a maximum mileage limit as low as 1500 miles at the policy purchase.
Return to Invoice GAP Insurance
This is the most popular and well-known version of GAP cover. New and used car buyers equally favour it.
Return to Invoice GAP Insurance products are available in the market with a maximum recorded mileage at the start of the policy between 80,000 and 120,000 miles. Current GAPInsurance123 RTI has a maximum mileage of 80,000 miles on the policy's start date.
Finance GAP Insurance
Finance GAP Insurance (also known as negative equity GAP Insurance) covers the difference between your car insurance payout and the outstanding finance balance on your finance agreement. This can clear what is known as negative equity on a loan arrangement.
As Finance GAP is aimed at new and used cars, you may see a maximum mileage cap at policy inception similar to that of a Return to Invoice policy.
Lease GAP Insurance
Lease GAP Insurance covers the difference between your motor insurer's settlement and the outstanding finance settlement on the contract hire agreement. This could include outstanding rental payments on your lease.
This type of insurance often has an annual mileage cap, and exceeding this cap could affect your coverage.
So, for example, you are contracted for 25,000 miles a year on the lease, but the Lease GAP cover has a maximum mileage cap of 20,000 miles a year. In this case, you would not be eligible for Lease and Contract Hire GAP cover.
Top Up GAP Insurance
Top Up GAP is a bit different. Instead of protecting a set figure for a number of years, Top Up GAP is an annual, renewable policy. If your car is written off or stolen, then the Top Up GAP can add to the settlement provided by your comprehensive car insurance policy.
The typical settlement is to add 25% to the motor insurance settlement, capped at a maximum of £10,000.
Should you feel you need GAP Insurance and do not qualify for the other types, then Top Up GAP typically has either a higher maximum claim cap (120,000 miles) at policy purchase or no cap at all.
How to Choose the Right GAP Insurance Policy Considering Mileage
Choosing the right GAP Insurance policy requires checking mileage limits and restrictions on your desired products. Most GAP products have a maximum mileage cap at policy purchase only. However, it is also worth checking that there are no ongoing, annual mileage caps too.
GAP Insurance and Reliance on Your Motor Insurance
You must provide an accurate estimate of your annual mileage to your car insurance provider when you set up your annual motor insurance policy. If not, it can impact your GAP Insurance coverage. .png "Does vehicle mileage impact GAP Insurance?")
Why?
To make a successful GAP Insurance claim, you must first have a successful claim on your standard car insurance. This must lead to a car insurance payout of the car's market value.
If you reach this stage, you can claim your GAP Insurance policy cover.
If your motor insurer denies or reduces your claim because you have underestimated your annual mileage, this could impede your chances of making a successful GAP claim.
Understanding the impact of vehicle mileage on GAP Insurance is crucial for anyone considering this type of coverage. By being aware of mileage limits and how they can affect your policy, you can make informed decisions and ensure you're adequately protected in the event of a total loss.
Key takeaways
1. Understanding GAP Insurance: GAP Insurance covers the 'gap' between the market value of your car and the amount you still owe on your finance agreement or lease. It's handy if your vehicle is written off or stolen.
2. Role of Vehicle Mileage: Vehicle mileage plays a crucial role in GAP Insurance. It can influence the terms of your policy, the cost, and even the payout in the event of a claim.
3. Mileage Limits: Most GAP Insurance policies have a mileage limit. If your vehicle exceeds this limit, your GAP Insurance may not cover the total amount you owe on your finance agreement or lease in case of a total loss.
4. Types of GAP Insurance: There are several types of GAP Insurance, each with its own set of rules regarding mileage. These include Vehicle Replacement GAP Insurance, Finance GAP Insurance, and Lease GAP Insurance.
5. Choosing the Right Policy: When choosing a GAP Insurance policy, it's essential to understand your vehicle usage, compare different policies, and communicate openly with your insurance provider.
Remember, GAP Insurance specifics can vary between providers and individual policies. Always read the terms and conditions of your policy carefully and speak to your insurance provider if you have any questions.
Frequently Asked Questions
What happens if I underestimate my mileage when buying GAP Insurance?
If you underestimate your mileage when buying GAP Insurance, you could have your GAP Insurance claim reduced or rejected entirely. Check the limits of the policy you are buying and ensure the vehicle's mileage is detailed as accurately as you can.
Can I adjust my GAP Insurance policy if my mileage changes significantly?
In most cases, you will not be able to, but you should not need to. Most GAP products have a limit to the mileage when you buy the policy only. As long as your vehicle has a recorded mileage below this, then you should be fine.
If you have a GAP policy with an annual mileage cap and think you will exceed it, then it is best to speak to your provider.
Does the age of my vehicle affect my GAP Insurance in the same way as mileage?
The age of your vehicle can also affect your GAP Insurance, as different products can have different maximum age caps at the time of the policy purchase. Like the mileage caps, you should not have an issue if your vehicle exceeds the maximum age cap during the policy term, as long as the age was within limits when you bought the policy and the car.
Can I still claim on my GAP Insurance if my vehicle is written off and I've exceeded the mileage limit?
You can still make a claim if your vehicle is written off and you've exceeded the mileage limit on your GAP Insurance policy. However, you may not receive the full payout. Your claim could be reduced or denied altogether.
This guide has been written to understand how vehicle mileage impacts GAP Insurance. It's essential to remember that the specifics can vary between different insurance providers and individual policies. Always read the terms and conditions of your policy carefully and speak to your insurance provider if you have any questions.
Published 8/7/23, written by Mark Griffiths
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