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Vehicle replacement insurance

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Last updated: 8 December 2020

What is vehicle replacement gap insurance?

Vehicle replacement gap insurance covers the shortfall between what you paid for your car and its current market value.

Most insurance policies will only pay out your car’s current market value if it’s stolen or written off. That could leave you short of what you originally paid, because cars quickly decrease in value. This is likely to mean you’d have to buy a second-hand car.

Vehicle replacement insurance tops up the difference between your car insurance payout, and what you would need to buy a new car the same.

This can give you great peace of mind that if your car was stolen or written off, you could replace it with a new model of the same car.

How to find the best vehicle replacement insurance

To get the best vehicle replacement insurance (VRI) policy you need to:

  • Work out what VRI insurance cover limits you need

  • Think about how long you want vehicle replacement gap insurance cover for

  • Compare as many vehicle replacement gap insurance quotes as possible.

Here’s more information on how GAP insurance works, and what different types of policy you can choose from.

What VRI insurance cover do you need?

To work out what VRI insurance cover you need, think about:

  • What cover limit you want for your vehicle replacement gap insurance. Vehicle replacement is expensive. Work out how much you might need to claim to replace your car if it’s written off. Some VRI insurance providers cover up to £100,000.

  • How long you want VRI insurance cover for. Most vehicle replacement gap insurance providers offer policies for up to four or five years. The longer the VRI insurance policy, the more you’ll pay.

When you know what you need from your replacement gap insurance, get quotes to find the right policy for you.

Here’s how to work out if you need gap insurance

How does replacement gap insurance work?

If your car’s a write-off, replacement gap insurance covers the difference between your car insurance payout and the cost of buying your car new. It can pay out more than return to invoice gap insurance because it allows for the rising cost of cars. This means you should get enough money from your car and vehicle replacement insurance payouts to buy a brand-new model of your car.

Here’s an example:

  • You buy a car for £20,000 and take out gap insurance

  • One year later, your car is stolen

  • Your insurer pays out the market value, which is now £15,000

  • Your vehicle replacement gap insurance pays out £5,000 (that’s the difference between the market value and what you paid for the car)

  • This brings the total payout received to £20,000, which is what you paid for your car.

Do I need vehicle replacement gap insurance?

Cars are known to be one of the fastest depreciating assets you can have. As soon as you drive a new car off the forecourt, it begins to lose value. So, if it was stolen or written off, you’d be left badly out-of-pocket.

The other thing to consider is whether you’ve paid for your car using finance. If you have, and then it’s stolen or written off, you could be left continuing to pay off your finance. Your payout wouldn’t cover the amount owed, so you’d have to continue paying even though you no longer have the car. In both scenarios, replacement gap insurance could help you out of a sticky situation.

Does vehicle replacement insurance come with any exclusions?

Yes. Most insurance policies come with exclusions, so check yours carefully

Some policies might only cover cars less than five years old. Others may only cover cars with less than 50,000 miles on the clock.

Are there different types of VRI insurance?

Yes, there are several types which you can choose from. They’re all designed to ‘top up’ the payout you get from your car insurance if your car’s stolen or written off.

The main types are:

  • Vehicle replacement – This pays the difference between your car insurance payout and the cost of replacing your car with a new one the same.

  • Return to invoice – This tops up the difference between your insurer’s payout and the exact price you paid for the car. It means you can recover what you spent.

  • Return to value – This pays the difference between your car insurance payout and the value of the car when it was brand new. It’s good for people whose car is second-hand.

Am I still covered by replacement gap insurance, even if I’m at fault?

Yes, you’ll still be covered, even if the incident that left your car a write-off was your own fault. Most policies contain some exclusions. You won’t be covered if you’re driving under the influence of alcohol or drugs, for example. Check your vehicle replacement gap insurance policy carefully so you fully understand it.

Can I find cheap vehicle replacement gap insurance?

When it comes to insurance, finding a cheap policy should never be your number one concern. Having the right insurance in place is important and by going for the cheapest policy, you might find that you don’t have the right level of cover. This could leave you in a sticky financial situation if the worst happened.

Once you know what kind of cover you’re after, you’ll need to shop around. Remember that buying your vehicle replacement gap insurance from the car dealer isn’t usually the cheapest option.

You can also usually choose to pay for your vehicle replacement gap insurance policy in monthly instalments. This usually makes the policy a little more expensive overall, but it can make it more manageable to pay off.

What do I need to think about before I take out vehicle replacement insurance?

Before you take out vehicle replacement insurance, you’ll need to think about:

  • How much cover you want

  • How long you want your cover to last for

  • What type of purchase you need to cover (some policies only cover cars bought through dealerships)

  • How long you’ve owned the car (most policies only cover you if you’ve only had the car a short time)

Vehicle replacement insurance FAQs

No, you should compare quotes online first because it is usually much cheaper when you buy direct from the insurer.

It depends on how you bought your car, how much you paid and if you want a brand-new replacement. Here is how to work out which is right for you.

It depends on the make and model of your car, how much it costs to buy, what cover limit you need and how long you want a policy for.

You can only make a vehicle replacement insurance claim if your car has been declared a total loss (written off), by your car insurer first.

Most policies will cover the excess you pay to your car insurer up to a set amount, for example £250.

Yes, some policies are designed for cars bought on finance or lease. They will pay off anything you owe after your car insurance has paid out.

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