How to avoid a financial loss when your car is written off

New and used car buyers are potentially losing thousands of pounds when their car is written off in an accident through not taking out an additional insurance policy when they spend their hard earned money.

MB&G, the UK’s largest privately owned warranty provider believes the main reason for drivers not taking out either Guaranteed Asset Protection (GAP) or Return to Invoice Insurance (RTI) from their new or used car dealer is a lack of understanding about the benefits of these policies, combined with dealers not offering the opportunity to purchase such a policy.

More than half a million cars are written off in the UK each year and many drivers are left owing money to their finance company as their insurance payout doesn’t match the outstanding finance on their car.

On higher value new cars and used cars this could amount to a few thousand pounds, especially if the car is only a few weeks old.

GAP insurance pays out on the difference between the insurer’s value and the outstanding finance value, and is now insisted upon by many finance companies when high value cars are bought on Hire Purchase, Contract Hire or Personal Contract Purchase.

“We recently had a situation where a high value prestige car was written off following an accident. The shortfall between the insurance pay out and the outstanding finance was £12000 because the car was only weeks into its finance contract,” explained Kevin Pearce, operations director of MB&G.

“Because the driver had taken out GAP insurance at his franchised dealer the policy paid out and was able to buy another car without being out of pocket,” he added.

Return to Invoice GAP insurance is another product worth considering as if a car is written off the policy pays out on the difference between what a driver originally paid for the car and the insurer’s valuation of the car.

For instance if a driver bought the car for £15,000 and four years later it is written off and the insurer pays out just £5,000, the policy would pay out the £10,000 difference(subject to the claim limit on the policy purchased). The driver can then use the money to buy a similar car and is not out of pocket.

“Drivers shouldn’t treat these policies with suspicion; instead they should look at whether they could afford to pay off the finance company if their car was written off tomorrow.”

“Franchised and used car dealers offer these types of policies and the majority can be tailored to suit the make, model and value of car when it is purchased either through cash, finance or on contract hire,” explained Pearce.

MB&G has recently launched a brand new GAP insurance product called Ultimate Protection Gap Cover which combines both GAP insurance and Return to Invoice GAP Insurance in a single policy. It is available on new and used cars for up to 36 months.