needforspeed

Is it worth it?

I struggle with the concept of having an insurance policy that pays out in the event that my car insurance policy doesn't pay out

But then I am one of the people that NEVER buys the extended warranty.

Is it worth it?

dlevi67

Depends. Your insurance company (in most cases - there are some that will match new for old for the first six months or so) will pay for the "market value" of the car (i.e. what you would get for selling it, not what you will need to pay for an equivalent one!). With a new or nearly new car, the difference can be considerable, and with high value vehicles even more so.

On the other hand, all insurances have an element of profit (for the insurance company!), so you should only buy insurance when you think you won't be able to cover the loss on your own.

Personally, given the time waste and pain involved in getting the insurance company to pay a reasonable amount of money without a guarantee of success, I'd rather pay the extra... (I do, actually: ?350 for 3 years, gap up to ?17,500 - i.e. I can get a practically new car for three years if the current one is written off, as depreciation would be ~the same over this period!)

Just my 0.02p

D

needforspeed

Thanks - I have found a number of companies who offer independant GAP insurance for much less than BMW - and I am tempted to go for it.

But my problem is this - I have a 4 year lease purchase deal with a final payment which SHOULD be equivalent to the value of my car at that stage. In simple terms I should be paying the loan off such that the settlement costs will generally be in line with the trade in value of the car at any given time.

So I will only have a shortfall if my insurer pays out LESS than the trade in value of my car. I can understand that they would wish to pay as little as possible, but how can they get away with paying out less than the TRADE IN value given that this is the lowest estimate of a cars worth?

Uk525i

I read about this kind of thing in a motoring magazine recently, I think they will pay out for what a car is worth, but excluding the dealers profit, eg trade in price. A complete rip-off as you have to pay more to get the same car... Typical robbing insurance companies..
But I cant complain too much about insurance, I have pet insurance for ?5 a month & the same robbers just paid out ?900 for some extortionate vets bill

gIzzE

You want to get 'Return To Invoice' insurance, this will obviously pay you back invoice price not just cover the GAP in value bewteen what your car books for and what it costs to get you into a similar spec vehichle.

Also you really should have done it with the finance, paying it monthly, I pay ?6 a month with Lombard for 'R.T.I' so if I get rid of the car after 12 months it will have only cost me ?72, better than paying the ?275 up front.
That ?275 was to make up any loss to ?42k, at the moment my car books at ?32500 so it would give me an extra ?9500 if anything were to happen today.

dlevi67

Well - assuming the trade-in value is exactly the same as your liability (assuming the loss adjuster has the same opinion of your car's worth as the dealer/finance house, basically - which is unlikely, as the finance house has an incentive to say the car is worth more, and the loss adjuster to say it's worth less), you would not have a gap in the sense that you would settle the outstanding debt, bar any penalties. But then you have no car! And you will have paid your lease until then and nothing to show for it.

The way gap insurance should work (at least - the way I understand the policy I have does!) is that they will not pay for any shortfall in the [Insurance Payout - Lease Amount Outstanding] equation, but they will effectively pay for the difference [Insurance Payout - New Car Cost] - at least up to a point. You are basically insuring the value of your current lease payments, rather than the difference in Payout - Debt.

BTW - I got a couple of quotes from independents, and they weren't substantially different from the BMW quote, so I went for that one out of convenience and hoping it would be less fuss if ever it came to pay for it. How much did you get quoted for?

Again - just my 0.02p - and hasten to add I have no connections with the insurance industry.

Cheers

D

dlevi67

Sorry gIzzE - cross posted exactly the same thing. And this answers my question too - it seems BMW is still more expensive (?350 for 3 years, spread over 12 months). Thanks

D

needforspeed

Well I only have ?1000 deposit on the car and everything else is financed. It's paid for by a cash allowance I recieve in lieu of a company car and I don't ever plan to own the car outright - instead I'll probably trade it back in a couple of years.

It just seems to me that so long as the valuation pays off the finance (which it should if they pay book value) then the payments I have already made aren't lost - they are just the normal costs of running the car.

I didn't get my finance from Lombard in the end - so I don't know what they would charge. The dealer mentioned a silly figure - something like ?700.

I've found one which offers 3 year cover for the amount between the insurance payout and the original cost of the car (max ?25) for ?225

It sort of feels excessive to me though - because if the car was stolen after 2 years, this would effectively allow me to replace it with a new one, but only have the balance of finance owing. In effect I would make a huge profit. For that sort of money I will probably get it.

This only becomes essential if there is a real chance that the insurers will pay below book value for the car - is that likely?

dlevi67

Taking your points more or less in order:

1. If the company will keep paying your car allowance, and you have no equity in the car, then you don't "need" gap insurance. Pay off the lease on the stolen/written off car and open a new lease for a new car. Chances are that any difference between value as assessed by the loss adjuster and amount owing will be small - unless there are strong penalties for ending the deal early.

2. Clearly the payments ARE the cost of running the car - plus the cost of financing it, including the balloon payment at the end (did you realise that?). My issue is that if my car were to be written off in the next three years, I probably could not afford to put in another significant deposit, and would need to trade down considerably. Your situation is different, as you have no equity interest to protect.

3. Yes, you would end up with a "profit". For which you have paid a premium. Any time you get insurance, you are effectively placing a bet... when's the last time you've met a poor bookmaker? Don't worry, these guys know their statistics pretty well, and if they make a loss on a claim, they make sufficient gains on everybody else who does not claim!

Cheers

D

needforspeed

Thanks - I think I'll probably get it - just in case - the 'profit' would soften the blow if I lost my new car.