GAP Insurance
Welcome to the Jaguar XF Forum.
Results 1 to 10 of 10

Thread: GAP Insurance

  1. #1
    Junior Member
    Join Date
    Aug 2014
    Posts
    11

    GAP Insurance

    Hi all,

    Please excuse my ignorance here but it's something I've never needed or looked at before.

    I am patiently awaiting for my new XF to arrive and was starting to think about GAP insurance.

    my question is, is it something that you guys would consider an essential purchase? And also what kind of insurance should I buy?

    I've ordered a premium luxury, on a 4 year lease deal (PCH) and the list price with added extras would be circa £40K.

  2. Remove Advertisements
    Jaguar XF Forum
    Advertisements
     

  3. #2
    Member
    Join Date
    Jun 2014
    Location
    Holmfirth
    Posts
    37
    Quote Originally Posted by dmeyers55 View Post
    Hi all,

    Please excuse my ignorance here but it's something I've never needed or looked at before.

    I am patiently awaiting for my new XF to arrive and was starting to think about GAP insurance.

    my question is, is it something that you guys would consider an essential purchase? And also what kind of insurance should I buy?

    I've ordered a premium luxury, on a 4 year lease deal (PCH) and the list price with added extras would be circa £40K.
    If it's a PCH (and not a PCP) then you'd potentially be more exposed than most people appreciate, but it very much depends on how the Finance House would calculate the settlement figure of the PCH at the time of claim and it can vary considerably from one company to another.

    The usual approach, is that in the event of the vehicle being declared a Total Loss, the payout from the Motor Insurer would go directly to the Finance Company and then the Finance Company would ask you to pay them the entire balance of outstanding monthly rentals PLUS any amount by which the Motor Insurer's payout fell short of what they believe the car to be worth. Of course if you follow this logic through... if you had a write-off with only 2 monthly rentals left to pay, subject to the Motor Insurer's payout in terms of the value of the vehicle, the potential financial liability to you is going to be comparatively small compared to if a write-off was to occur when you had say, 40 monthly rentals remaining to pay.

    However I've spoken to people in recent times that have PCH agreements that calculate the settlement figure in very different ways including:


    • Only having to pay 50% of the outstanding monthly rentals
    • Only having to pay a nominal £X (in this particular case £25) per outstanding monthly rental
    • Not having to pay any of the outstanding monthly rentals


    Now, I used to sell Finance Agreements including Contract Hire Agreements and prior to the conversation with this particular customer I'd never heard of the latter of the three scenarios above and I questioned it many times, but he read the agreement to me over the phone and it seemed to be legit - sadly I cannot recall the name of the finance company though ).

    My point, is that in order to determine if you *need* GAP insurance, your first port of call is to determine how the Contract Hire Agreement settlement figure is going to be calculated in the event of a Total Loss and therefore what your liability would be in a worst-case scenario (in terms of a PCH, "worst-case" would be a write-off early within the agreement).

    As a more specific example... assuming your monthly rentals were £570 per month and that at the time you start(ed) driving the vehicle you had 48 monthly rentals left to pay. If the car was written off before you'd made any of the payments, at its most basic level the Finance House would take the the payout from the Motor Insurer and potentially ask you for the £27,360 outstanding in unpaid rentals (48 x £570 = £27,360) and that's assuming there's no further shortfall in the value of the vehicle paid out by the Motor Insurer (although so early on it's very unlikely there would be). This, is when GAP insurance steps in.


    Let me just clarify something first. There are two main types of GAP insurance promoted today: Invoice GAP insurance and Replacement GAP Insurance. In their original formats you cannot have either for a vehicle which is the subject of a Contract Hire Agreement. Invoice GAP insurance would aim to pay the difference between your Motor Insurance payout and the original purchase price you bought the car for whilst Replacement GAP insurance would aim to pay the difference between your Motor Insurance payout and the cost of replacing the vehicle new-for-old at the time of claim. With either policy, the ultimate goal would be to see you able to clear the remaining balance of any finance and then have money left over to put towards the cost of your next vehicle.

    The issue, is that you never own a Contract Hire vehicle, therefore a cash payout leaving you with funds left over would see you effectively profit from a the write-off of a car that you were basically just renting and this clearly can not be permitted. So, you're not permitted to have that type of GAP insurance and what you actually need is a "Finance" or more specifically a "Contract Hire" GAP insurance policy.

    So (admittedly with the potential for some confusion) some companies (including ourselves) have opted to merge our Invoice and Contract Hire GAP insurance policies in to one single policy document, whereby if the vehicle was being purchased (Cash / HP / PCP / LP) it works one way (getting you back to the original purchase price) however if it's a Contract Hire Agreement the policy aims to pay the difference between your Motor Insurance payout and the Contract Hire Agreement settlement figure at the time of claim, whereby the ultimate goal is to see you get back to a "zero" position - No Car, but your liability to the finance company cleared too!


    As a point of reference, for a vehicle with a list price of £40k, so long as the annual mileage limit on the Contract Hire Agreement is less than 20,000 miles per year, we could provide you with a GAP insurance policy incorporating a Claim Limit of £40k (granted it's more than you'll ever need but the next level down is £25k and subject to how much your monthly rentals are, you may have a liability greater than £25k from the outset of the PCH agreement) for £232.98, less a 10% forum member discount bringing it to £209.68. In the event of your vehicle being written off within the policy duration, the policy would pay the difference between your Motor Insurance payout and the Contract Hire Agreement settlement figure at the time of claim.

    You can review the terms and conditions of our policies here at your leisure (remember it's the Invoice GAP insurance wordings that apply to PCH agreements).

    If you'd care to let me know how much your monthly rentals are and also the structure of the PCH agreement (e.g. 3 + 45 / 3 + 47 / 6 + 48) and what the annual mileage limit is etc, I can quote you according to your specific requirements.


    I hope this helps

    Best wishes

    David

  4. #3
    Junior Member
    Join Date
    Aug 2014
    Posts
    11
    Hi David,

    First of all, thank you for the very detailed and thorough reply, I appreciate it, and I now have a much clearer understanding.

    In order to give an accurate quote, my lease is for a period of 4 years, on a 6+47 basis.

    Monthly payments are £418.27, including maintenance.

    My annual mileage limit is 10,000 and this wouldn't be exceeded.

    I've today read the contract terms and it appears as though the finance company would expect 50% of the remaining rentals in event of cancellation/write off.

    let me know if you need any further information.

    Thanks

  5. Remove Advertisements
    Jaguar XF Forum
    Advertisements
     

  6. #4
    Member
    Join Date
    Jun 2014
    Location
    Holmfirth
    Posts
    37
    Quote Originally Posted by dmeyers55 View Post
    Hi David,

    First of all, thank you for the very detailed and thorough reply, I appreciate it, and I now have a much clearer understanding.

    In order to give an accurate quote, my lease is for a period of 4 years, on a 6+47 basis.

    Monthly payments are £418.27, including maintenance.

    My annual mileage limit is 10,000 and this wouldn't be exceeded.

    I've today read the contract terms and it appears as though the finance company would expect 50% of the remaining rentals in event of cancellation/write off.

    let me know if you need any further information.

    Thanks
    Sorry! I either didn't receive notification of (or completely missed it if I did) your reply!!

    Okay... so my logic would be this:


    • 6 x £418.27 = £2,509.62
    • 47 x £418.27 = £19,658.69
    • Combined sum: £22,168.31


    If you've paid the 6 upfront rentals prior to taking delivery of your vehicle, the total amount of outstanding rentals at the time you begin driving the vehicle is £19,658.69 (50% of which would be £9,829.35. If not, we need to look at the combined sum of £22,168.31 (50% of which would be £11,084.16).

    Starting with £19,658.69 (50% being £9,829.35), in theory a £10,000 Claim Limit on a GAP insurance policy *should* be sufficient, however it only leaves room for a circa £170 shortfall/buffer between the Motor Insurer's (MI) payout and the vehicle value expected by the finance house... but, this would only be an issue if a claim was to occur prior to the first rental being paid, after which the room for shortfall in MI payout would increase by £418.27 to £588.27 and then after second rental had been paid the room for shortfall would increase by a further £418.27 to £1,006.54 and so on, and so on.

    For the sake of the difference in cost (see below) you may wish to opt for a £12,500 Claim Limit from the outset on the grounds that it should in theory be more than you're ever likely to require, whereas there's the (albeit remote) possibility you might end up needing more than £10k in the very early days.

    If you're to pay the initial 6-rentals after taking delivery of the vehicle, my advice would be that you should not look at anything less than £12,500 as a Claim Limit.


    All that said, you should be aware that our policy will NOT cover the outstanding maintenance element of your rentals and you'd need to understand further whether the 50% of outstanding rentals clause, would apply to the maintenance element of the rentals too. Once you know this, you should be able to use my logic above to re-work the figures and for reference (depending on the cost of the maintenance it may or may not be appropriate) I've included a £7,500 Claim Limit option below.

    Prices:

    Claim Limit
    Full Price
    Forum Discount
    Policy Price
    £7,500 £195.27 -£19.53 £175.74
    £10,000 £200.27 -£20.03
    £180.24
    £12,500 £206.85 -£20.69
    £186.16


    Please note that the prices above are based on a 4-year policy duration for a vehicle for which the list price is between £37,500 and £50k. The prices are the one-off all-inclusive premiums for that whole 4-year duration. The prices are correct as of 13:13 on September 8th 2014 and are subject to change. Real-time quotes can be acquired at any time from www.GapInsurance.co.uk.


    If you need any other information, please don't hesitate to ask.

    Thanks

    David

  7. #5
    Junior Member
    Join Date
    Aug 2014
    Posts
    11
    Hi David,

    Thanks for your detailed response, and apologies for my delay in getting back to you, getting married next weekend so as you can imagine a real busy time!!

    Will definitely go with you guys as price seems reasonable and the effort put into your posts deserves the business anyway, so won't even bother to shop around.

    I am away for almost a month (honeymoon!) and due to take delivery of my new XF the day I get back on the 17th October. I will get in touch around then, maybe just before to arrange the GAP insurance if that's ok.

    Many Thanks

  8. #6
    Member
    Join Date
    Jun 2014
    Location
    Holmfirth
    Posts
    37
    Quote Originally Posted by dmeyers55 View Post
    Hi David,

    Thanks for your detailed response, and apologies for my delay in getting back to you, getting married next weekend so as you can imagine a real busy time!!

    Will definitely go with you guys as price seems reasonable and the effort put into your posts deserves the business anyway, so won't even bother to shop around.

    I am away for almost a month (honeymoon!) and due to take delivery of my new XF the day I get back on the 17th October. I will get in touch around then, maybe just before to arrange the GAP insurance if that's ok.

    Many Thanks
    Sorry! I think the notification of your post must have got lost on the interweb somewhere... only just seen this.

    I hope all wedding stuff is going well... I was only saying earlier today that it's my 10 year anniversary at the end of this year ( I need to start contemplating doing something about that ), but I can remember it like it was yesterday and I know very well what you're going through with preparations right now... all the very best anyway!

    Enjoy your break and I look forward to speaking to you on your return.

    Best wishes

    David

  9. #7
    Junior Member
    Join Date
    Aug 2014
    Posts
    11
    Hi David,

    Hope you are well.

    due to take delivery of the XF this coming Friday (17th) so would like to go ahead and organize the GAP insurance with you.

    Are we best to take this to PM or email?

    Best Regards,

    Dean

  10. #8
    Administrator
    Join Date
    May 2008
    Posts
    22,391
    I advise you to use email because it can't be assumed that David will logon here before your mail would reach his inbox

  11. #9
    Member
    Join Date
    Jun 2014
    Location
    Holmfirth
    Posts
    37
    Quote Originally Posted by dmeyers55 View Post
    Hi David,

    Hope you are well.

    due to take delivery of the XF this coming Friday (17th) so would like to go ahead and organize the GAP insurance with you.

    Are we best to take this to PM or email?

    Best Regards,

    Dean
    Ok - so it's configured to notify immediately of replies in this thread but for some reason I'm not getting them. Perhaps it's being blocked by a filter at my end?

    Either way, I'm just about to reply to the email that you sent to us last night

  12. #10
    Member
    Join Date
    Jun 2014
    Location
    Holmfirth
    Posts
    37
    Quote Originally Posted by dmeyers55 View Post
    Hi David,

    Hope you are well.

    due to take delivery of the XF this coming Friday (17th) so would like to go ahead and organize the GAP insurance with you.

    Are we best to take this to PM or email?

    Best Regards,

    Dean
    Thank you for your custom Dean. Much appreciated!

    Best wishes

    David

 

 

Bookmarks

Posting Permissions

  • You may not post new threads
  • You may not post replies
  • You may not post attachments
  • You may not edit your posts
  •  
Back to top