What is Vehicle Replacement Gap Insurance?
Vehicle Replacement Insurance, or VRI Insurance for short, is primarily designed for brand new cars and cars that are under 3 months old and is probably the most beneficial of all the gap insurance products available. VRI gap insurance will replace your car with a brand new one in the event of an insurance write-off. This is the main difference between finance gap insurance and return to invoice gap insurance.
In the event that your car is written off due to an accident or vehicle theft your motor insurance provider will only pay you the current market value of your car, irrespective of how much you paid for it at the time of purchase. The insurance company valuation will be based solely on the current market value of your vehicle at the time of the write-off, which in most cases will be significantly less than the cost of replacing the vehicle for a like-for-like model.
Whether you purchased your vehicle using you hard earned cash, on a personal loan, or using some form of finance plan, your car will be depreciating from the moment you drive it off the forecourt.
Click here to compare vehicle replacement products and get a quote on your car today!
Why Do You Need Vehicle Replacement Gap Insurance?
Unfortunately we live in world where crime is on the up, particularly vehicle crime. A vehicle is stolen in the UK every minute and a third of them are never recovered! The number of insurance claims for vehicles that become a total loss is increasing at an alarming rate and now exceeds over 500,000 vehicles each year.
- Your motor insurance pays you the depreciated value of your vehicle at the time the claim is made. This WILL be significantly less than the cost of replacing the vehicle for a like for like model!
- Depreciation is an unavoidable factor associated with vehicle ownership. Cars start to depreciate the day after purchase with some cars, such as luxury models, 4×4 vehicles, and less popular cars, depreciating by several hundred pounds each month!
- The cost of replacing a brand new car is on the increase due to manufacturers reacting to both the decrease in demand for new cars and the current exchange rate issues, which are pushing up new car prices at an alarming rate.
- The gap between a cars value and the cost of a brand new replacement is increasing every year.
- Typically a car depreciates by up to 60% over a three year period.
- The longer you own your new car the bigger the gap you will have between the cost of vehicle replacement and the insurance company valuation.
How Much Could Vehicle Replacement Insurance Save You?
Image the scenario! You’ve recently purchased a brand new car and wake up one morning to discover it has vanished from your driveway or, worse still, you have been involved in an accident that results is your vehicle been written off by your motor insurance company.
Show me an example of Vehicle Replacement Insurance
Let’s take a look at a common and typical scenario….
| Mr Jones buys a vehicle for an agreed inclusive price of | £20,000.00 |
| He pays a deposit of | £ 1,000.00 |
| He then pays the remaining balance to the dealer on collection of | £19,000.00 |
| Sadly, after 24 months of happy motoring Mr Jones’s car is stolen and written off by his insurer. | |
| After some debate, Mr Jones’s insurance company make a final settlement offer of | £10,000.00 |
| With inflation and price increases the cost of replacing Mr Jones’s new car is | £22,500.00 |
| Mr Jones therefore needs to pay the difference between the insurer’s offer and the cost of a new car | £12,500.00 |
| With a Vehicle Replacement Policy, Mr Jones would receive the difference of | £12,500,00 |
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Other Types of Gap Insurance
There are other types of gap insurance available that provide different levels of cover.
If you purchased your vehicle using some form of finance you may want to consider Finance Gap Insurance. This type of gap insurance covers the difference between the outstanding finance balance (settlement amount) and the insurance valuation (offer). Finance Gap is particularly beneficial if you have borrowed a significant proportion of the vehicle purchase price as you could be in negative equity during the early years of ownership.
Click here to find out more about Finance Gap Insurance.
Return To Invoice Gap Insurance (RTI Insurance) provides cover for the difference between the motor insurer’s valuation and the original invoice price of the vehicle. RTI Insurance is now the most popular type of gap insurance available due to the high levels of cover provided.
Click here to find out more about Return to Invoice (RTI Insurance).
You can also check out our more detailed gap insurance product review fact sheets for the online gap insurance providers we recommend.
Click here to find out more information about Click4Gap
Click here to find out more information about Ala.co.uk
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