When you buy a new car the last thing you want to think about is potential thefts or breakdowns OR the money that you will lose if it gets written off.
But, if you have an accident and your car is written off, it's worth knowing that your car insurance will only pay out the current market value.
So, if you bought it for £20,000 and it was only worth £15,000 at the time of the accident a couple of years later, that is all you will get.
And that's where Return to Invoice Gap Insurance comes in.
As new cars depreciate rapidly in the first three years, often by up to 70%, GAP insurance could save you thousands of pounds.
RTI Gap Insurance covers the difference between the exact amount you paid for your car and your insurance pay-out if it is written-off or stolen.
RTI Gap Insurance is aimed at cars bought from a dealer within the last three months. In the event of a write-off, the pay-out will be the difference between the valuation and the original purchase invoice price.
If your car is written off or stolen, your insurer will pay what it's worth at the time – which is likely to be a lot less if you bought it new. This means that when you’re getting a replacement car there's a 'gap' between the amount your insurer pays and the amount you originally paid.
Do I need RTI Gap Insurance?
It isn’t absolutely essential because your normal car insurance policy should pay out for a replacement car of the same condition and age as yours when it was written off which means you are not any worse off.
If you are not bothered by your car's depreciation, there isn’t much point in paying out for gap insurance as your normal insurance will match your car like-for-like, so the only benefit of gap is that you will get back the money you've paid.
If you have a car that is less than a year old, most fully comprehensive car insurance policies offer a replacement in the first 12 or 24 months in which case you will not need the extra gap insurance.
If you own a used car, gap insurance isn't as useful as the value of your car will already have depreciated particularly if it's more than three years old.
How to buy RTI Gap Insurance
It's available in a number of different places and usually sold by dealerships or specialist brokers. Make sure you shop around as your dealer’s might not be the cheapest option.
Get a range of quotes from online brokers and always check the cover amount, length of cover, length of ownership and type of purchase covered (some insurers only cover cars bought through dealerships)
Remember, you can only claim on your RTI Gap Insurance if your car is a total loss and written off by your car insurers.
RTI Gap Insurance mainly covers cars, motorbikes and vans.