Now we understand that we sing the praises of Vehicle Replacement Insurance on a fairly consistent basis. So if it is such a wonderful type of insurance protection would it suit everyone? Simple answer is no!
So who would benefit from Vehicle Replacement Insurance and are there any circumstances where Return to Invoice would be better?
Candidates for Vehicle Replacement Insurance
1 – The buyer of a model on ‘run out’
This has to be the number one reason for anyone to buy VRI Gap Insurance above RTI Gap Insurance. Recently we have seen Vauxhall’s change the ever popular Zafira model. The ‘run out’ versions of the old model were being sold for less than £10,000 brand new (which is on heck of a bargain for anyone who got one!). The new Zafira model is now being sold for £20,000 plus for the equivalent model.
So lets consider if a consumer was to buy the last of the old model, what position they may be in if the vehicle was written off in say 4 years time.
The old model vehicle, despite it being a bargain price when new, will still be in a position where it will lose value. Lets say the vehicle is now worth only £3,000.
If the consumer now wanted to claim on a vehicle replacement policy, we would need to consider how much the equivalent new model is now. Bear in mind that will be the current, brand new Zafira and most likely much more expensive than they originally paid. Lets say the equivalent new model is now £22,000.
So if you made a claim on a Vehicle Replacement basis then the difference will be £19,000 to get enough money to buy a replacement model. Compare this if you had bought a Return to Invoice policy, this would only return you to the original new price of around £10,000. This clearly would not be enough for another new model at this point.
However, one very important point is
Choose your Vehicle Replacement Insurance Claim Limit wisely
Vehicle Replacement Insurance is a wonderful and comprehensive cover, but ensure you give yourself enough claim limit to cover the difference. Consider the example above, on a £10,000 car, the correct claim limit would have been £20,000 in this case, in order for the difference to be bridged. This is an extreme case admittedly, but you must always think about the likely difference in price, and if you have a bargain this time round, you may not get the same next time.
Who does not suit Vehicle Replacement Insurance?
Well there are two main examples you could look at for people who vehicle replacement may not suit. Vehicles on lease or contract hire agreements can never be owned by the leaseholder, and therefore the VRI cover would not be suitable. Specific contract hire gap insurance can be bought to bridge the shortfall on lease settlements.
Other examples would be if of the need for vehicle replacement would be if someone is buying a vehicle for full list price as it is a new model. If they are looking for 3 year cover, then there is a good chance that in 3 years time the model will have lost a little of its appeal, and may have some discounted deals around. This means that actually the original invoice price may be higher than the replacement cost, although it has to be said that this scenario is highly unlikely in a practical sense. Vehicle replacement could be the answer.
Vehicle Replacement Insurance is fast becoming the most popular choice amongst vehicle buyers, as it can almost ‘inflation proof’ your vehicle ownership if the vehicle is written off.