Buying a new car is always a feat to celebrate. Whether it is your first car or an addition to the long streak of vehicles you have bought before, it is still going to be special. Although, it often is the case that the one car that you want to buy today is just a little out of your budget. It can be a little difficult to reset your heart and mind on a more budget-friendly model. But thanks to the extensive leasing and financing options available in the UAE, you can easily get the car you want. Gap insurance comes in the picture right after you are handed over with the keys to your new car. Gap insurance coverage is an optional coverage offered with car insurance plans. It helps in covering the gap between the market value of your car and the total lease amount due to the bank if your car goes in total loss.
Gap insurance coverage or guaranteed asset protection insurance is supplementary or optional insurance coverage that pays off the difference between the market value of a totalled car and the loan amount due. If your car has been stolen or damaged in an accident beyond repair, it is declared as “totalled” or “total loss” by the insurance company. Here, if you have a comprehensive car insurance plan, the insurance company will pay you the market value of the car. However, let’s assume that you got the car financed when you bought it. Now, there is a fair chance that the car loan amount due to the bank will be much more than the amount insurance companies pay you. If you have gap insurance, this difference will be paid off by the provider and you will suffer no loss.
To understand the workings of Gap insurance coverage quickly, let’s assume a scenario:
The simple reason why anyone would need gap insurance is – depreciation. Cars or any kind of motor vehicle lose their value very quickly as soon as they are out of the showroom. General statistic show that your car may lose over 20% of its original showroom value within the very first year of purchase.
Now, if you are someone who had put a small deposit as a down payment and financed the rest amount, you will need gap insurance. If your car goes into total loss now after the financing, the insurance company will not pay equivalent to the showroom price. You will need gap insurance to cover the difference between the amount paid by the insurance company and the total loan amount due. Do not forget that interest rates are also a part of this equation.
There are several different scenarios when a gap insurance cover may come in handy. Given below are the top picks:
The following is the basic eligibility criteria to buy gap insurance coverage in the UAE
Another additional thing you need to look for is the age of your vehicle. The criteria for the age of the car can differ for every Gap insurance provider. So, make sure that you check with your insurance provider for the allowed age of the car. Also, note that both new and second-hand car owners can buy this cover.
Every kind of insurance policy comes with a set of inclusions and exclusions. The same is the case here with gap insurance coverage. Gap coverage will pay up if your car gets totalled because of one of these reasons:
Some insurance providers add another layer of benefit to the Gap insurance and provider a cash benefit along with covering the gap.
The only time gap insurance coverage will come into effect is if there is a difference between the insurance amount received for a totalled car and the loan amount due. Any other kind of incapability to pay off the loan amount for the financing or leasing of the car are considered as exclusions for gap coverage. For example,
Apart from that, there can be some other additional exclusions such as:
Technically, there is no set time to buy a Gap insurance cover. However, most insurance providers set a certain time limit. The reason for that is simple. The older your car is, the more it depreciates and equally faster too. This can increase the risk of a car getting totalled even by a small accident. Also, the older the car is, the bigger the gap between the market value and loan amount due will be.
The generic time limit insurance companies set on buying Gap insurance is 2-3 years after you purchased the vehicle. Some insurance companies even extend the limit to 5 years. Both new and second-car owners can buy Gap insurance coverage but it also depends on the services available with providers.
A gap insurance coverage plan is a very handy little tool if you suspect finding yourself in a pickle. But, since it is an insurance plan, it is going to cost you money. SO, make sure that you buy gap coverage only when you need it. Do not forget to drop it when the need for the insurance is not there anymore. Simply by weighing your options carefully and taking a little assistance from the experts at PolicyBazaar UAE, you can easily get the right cover that you need.