Consumers will have their reasons why they choose a certain product over another, keeping insurance providers on their toes in terms of offering the best possible coverage. Now while it’s one thing to roll out a not-so-attractive proposition, it’s another to not even get prospective insureds to know what’s on the table – Guaranteed Asset Protection (GAP) insurance being one such product that only a tenth of UK motorists have taken out.
New research from price comparison website and switching service uSwitch.com found that just 38% are aware of GAP insurance, with only one in 10 purchasing it – a rather small percentage, given that 86% of motorists in the UK use a loan or other form of credit agreement when buying a car.
The study also revealed that, in the event of theft or beyond-repair damage, most motor insurance policies will only cover a vehicle’s value at the time of write-off or theft and not its value when it was bought.
“Should this happen within the first three years of it being purchased, the average motorist could lose out on £4,000 for the most popular cars but can run up to more than £8,000 for some models,” said uSwitch.com. “This can be cause for concern for drivers who have purchased a new car as its value falls rapidly immediately after purchase – in some cases up to 60% within the first three years.” More so for those who took out loans to own a car, as there’s a mismatch between what they get compensated for and the outstanding loan amount they need to repay.
In light of this, uSwitch.com is urging the industry to provide policyholders the option to cover their vehicles at new or trade value. It noted that 78% of motorists would like to have the ability to choose the value of their motor insurance, regardless of whether the car is new or otherwise, instead of getting GAP coverage.
“Consumers should have a clear choice of the amount of financial liability they want to protect themselves against when insuring their vehicle,” said Rod Jones, insurance expert at uSwitch.com. “With so many of us opting to purchase cars on finance plans, it is vital that insurers make consumers aware of the possible shortfall between the loan value and the current used value of the car, and that they provide the option to cover their vehicle at new or market values.”