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The Truth about Write-Offs and Insurance Payouts

17 January 2017

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No motorist believes that they will get into a nasty accident when they purchase a ve-hicle, but unfortunately, statistics show that accidents occur all the time and often it is not the driver’s fault. Sometimes, these crashes are so bad that the vehicle is deemed unsalvageable by the insurance company and is written off. Many motorists believe that their Comprehensive Motor Insurance will cover them in this situation, but this is not the case.

What Happens if your Car is Written Off?

If your vehicle were to be written off then your insurer will only pay the current mar-ket value of the automobile. This can be significantly less than what you paid when you factor in depreciation and especially high-performance vehicles that depreciate faster. If the current market value is not enough to pay off the remaining finance or replace the automobile, it can leave the motorist seriously out of pocket. This is the last thing that you want after going through a traumatic accident, so what can be done about this?

GAP Insurance

GAP insurance is a type of insurance that covers any shortfall between the amount you receive from the payout and the amount outstanding on your agreement. This means that you do not need to come up with the funds yourself if you were to ever find yourself in this situation. It is always best to obtain this from a specialist insurer, like ALA.

Is It Worth It?

Some still may think that GAP Insurance is not worth it, but a closer look at some sta-tistics will show why it is so important. Firstly, vehicles can depreciate in value up to a staggering 77% over 3 years - this is even higher for high-performance automobiles. Next, you should know that cars are written off when stolen or damaged by flood or fire. With this in mind, car crime makes up one-third of all crime in the UK and 33% of stolen vehicles are never recovered, so you must also factor this in as well as the risk of being in an accident. Write-offs, unfortunately, occur very often so it is vital that motorists take steps to protect themselves and ensure that they do not foot a nasty bill.

As an example, your vehicle could cost £19.000 when you bought it, but it will be worth £10.450 after just 2 years (based on average depreciation rates). This means that if you were to get into an accident at this time and write the car off, you would have a shortfall of £8.550. GAP Insurance would cover this, ensuring that you are not seriously out of pocket.

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