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When it comes to safeguarding your vehicle investment, understanding the nuances of GAP Insurance products is crucial.
One term that often appears in this often in the title of GAP products is 'Combined.'
This term, typically seen in products like Combined Return to Invoice and Combined Vehicle Replacement Insurance, signifies a comprehensive coverage level achieved by integrating multiple GAP coverage levels into one product.
This article aims to demystify the concept of 'Combined' in GAP Insurance, providing you with a deeper understanding and helping you make an informed decision.
The term 'combined' in GAP Insurance refers to the amalgamation of two distinct styles of GAP Insurance into a single policy. This combination ensures that the policyholder benefits from the best of two different outcomes, depending on which is the higher amount at the time of the claim.
The three basic types of GAP Insurance are as follows:
Return to Invoice GAP - covers the difference between the motor insurance settlement at the point of total loss and the original price you paid for the vehicle on the sale invoice.
Vehicle Replacement GAP - covers the difference between the motor insurance settlement at the point of total loss and the cost of the equivalent replacement vehicle. The vehicle would be of the same age, mileage and specification as your car was on your purchase date.
Finance GAP - covers the difference between the motor insurance settlement at the point of total loss and the outstanding finance settlement on a hire purchase (HP) or personal contract purchase (PCP) agreement.
Generally speaking, the combined element comes from adding Finance GAP to one of the other standard types of cover. This is because many vehicles are financed by a hire purchase or personal contract purchase agreement.
Consumers can be concerned that a standard RTI or VRI policy will provide enough protection when the vehicle is financed.
Adding the Finance GAP protection means that if the finance settlement were higher than the invoice price (with RTI) or the replacement cost (with VRI), the policy would clear the higher finance amount.
Combined Return to Invoice (RTI) Gap Insurance is a comprehensive coverage that bridges the gap between the market value of your vehicle at the time it's declared a total loss by your motor insurer, and the higher amount of either
the original invoice price or
the outstanding finance settlement.
Let's illustrate this with an example. Suppose you purchased a vehicle for £15,000 in 2019, with £14,000 financed through the motor dealer.
If the vehicle is stolen in 2021, the market value may have depreciated to £9,000, with an outstanding finance settlement of £10,000.
Your Combined RTI Gap policy will cover the difference between the current market value (£9,000) and the higher amount of either the outstanding finance settlement (£10,000) or the original invoice price (£15,000).
In this scenario, the higher amount is the invoice price at £15,000, meaning Gap Insurance will provide an additional £6,000, bringing the total to £15,000 for the policyholder.
Combined Vehicle Replacement Insurance (VRI) is another type of GAP insurance that covers the difference between the market value of your vehicle and the higher amount of either:
the outstanding finance settlement or
the cost to replace your vehicle with an equivalent model.
For example, you buy a brand new Ford Focus 1.6 Titanium X for £18,000, with £15,000 financed.
The vehicle is stolen two years later, the market value may have fallen to £10,000, the outstanding finance is £11,000, and the cost of a new Ford Focus 1.6 Titanium X is now £19,500.
Your VRI policy will cover the difference between the market value of the two-year-old vehicle (£10,000) and the replacement cost of the new Focus (£19,500). This is because the higher amount of the outstanding finance or the equivalent replacement cost is the £19,500 that the replacement vehicle now costs.
'Combined' in GAP Insurance refers to the integration of two or more distinct styles of GAP Insurance into one policy, ensuring the policyholder benefits from the best outcome.
Where you have a finance agreement on the vehicle, or where you are not sure which of the individual GAP products would benefit you most in a claim.
For example, if you bought a car for £20,000 and put no deposit into the finance agreement, you could be concerned that your finance settlement could be higher than the invoice price initially.
In this example, having a combined product means the finance element can be covered off if the settlement is higher than £20,000.
This would be where one of the GAP elements provides no, or little cover and, therefore, would always be the lesser amount in a claim.
For example, if you buy a Combined Return to Invoice GAP on a cash purchase, then the RTI (back to invoice) element would always be what is covered.
This is because the finance element is not needed as you have no finance agreement on the vehicle.
Yes, some of the better Vehicle Replacement GAP products, like the one available on GAPInsurance123, cover three elements.
The policy can cover you, in the event of a claim, to the higher of:
The replacement cost of the equivalent vehicle
The original invoice price paid
The outstanding finance settlement
This differs from most VRI products as it adds the invoice price element. This helps because, on a few occasions, the original price you paid might be higher than the future replacement cost. A more standard VRI would reduce your settlement to below what you would have gotten with an RTI policy.
With the best outcome now a choice of three, you are guaranteed the best outcome.
Your policy's 'combined' aspect offers additional protection, especially if you have a linked hire purchase style finance agreement on your vehicle. Understanding these nuances of GAP Insurance can help you make an informed decision and ensure you have the right coverage for your vehicle.
Published 27/7/23, written by Mark Griffiths