So this new style of Gap Insurance is similar to ‘new for old’ home contents insurance, and VRI Gap Insurance can cover both DEPRECIATION and INFLATION
So why has VRI Gap Insurance become so popular?
Well in general, the cost of new vehicles tend to increase over time. For example, look at the list price of a few of the more popular vehicles in the UK in 2007 and in 2011.
Price 2007 Price 2011 Difference
Ford Ka 1.3 £7,995 £8,545 £560
Toyota Avensis £16,350 £20,065 £3,715
VW Golf GTI £20,607 £25,045 £4,438
So, as you can see, the vehicle prices of some popular vehicle have risen over the last few years. Factors such as VAT increases, higher manufacturing costs and new model introductions can see higher purchase prices.
In our examples above, a basic RTI Gap policy on your VW Golf in 2007 could leave you nearly £4,500 shy of the price of an equivalent replacement model in 2011.
The advantages in VRI Gap Insurance are clear. An important consideration with VRI Gap Insurance is the choice of an adequate ‘claim limit’. You need to remember you are looking to cover both the depreciation of your old vehicle, but also the inflation in replacing it with VRI Gap Insurance. It is an crucial to make sure you choose a large enough ‘claim limit’.
Other factors to consider when choosing a VRI Gap Insurance Policy
Claim Limit is the most important, and most overlooked issue with VRI Gap Insurance .Lets say your 2007 Avensis is written off and valued at £9,000, a £10,000 claim limit RTI would be sufficient return you to your original £16,350 purchase price, but still £3,700 short of the cost of a new equivalent model in 2011. To replace with the equivalent new Avensis,a VRI Gap Insurance policy with a £15,000 claim limit would be the best choice.
Also, many VRI Gap Insurance policies on the market actally provide cover to the original invoice price you paid, not the replacement costs. If you want the replacement cost covered then opt for a VRI Gap Insurance policy from an insurer such as AM Trust Europe, who do provide the equivalent. Their policies are available through many car dealers, or even cheaper online through an online broker. A broker like EasyGap.co.uk provide VRI Gap Insurance policies at heavily discounted prices, and even offer interest free instalment options on the purchase.
Hope this helps your understanding of how VRI Gap Insurance can work!