Drivers should mind the gap in their car insurance


Most drivers give little thought to whether their car insurance will pay off any outstanding finance if their vehicle is written off in an accident or stolen.

Around three-quarters of drivers risk losing money because their insurance does not cover this financial gap – adding up to about an £86 billion shortfall in cover for cars on the UK’s roads.

Some specialist brokers offer gap insurance to take the strain of this shortfall should the worst happen.

And the worst does tend to happen to some drivers – as 10% say they had a car written off after a crash and another 6% had a car stolen and never recovered.

For motorists who buy their car on finance – either with a loan, HP or lease finance – the debt does not disappear with the car.

Insurers will pay out for written off cars, but only at the value of the vehicle at the time of the incident. This value does not take in to account any outstanding finance.

The most unfavourable scenario sees motorists having to clear finance on a car they no longer have while scraping together the cash to buy a new one.

The decision to write-off a car lays with the insurer.

The insurer will make a decision based on the cost of repair, the age of the car and any other costs involved, like renting a hire car while the damaged vehicle is in for repair.

Valuing a car is often a point of contention between drivers and insurers.

Drivers often believe their car is worth more than it is, while insurers always want to minimise their pay out.

Car insurance policyholders should check the wording of their agreement – if the policy values a car at book value, the pay out is likely to be what a dealer would offer and will probably fall short of the finance outstanding.

Some insurers offer market valuer, which will result in a higher pay out.

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