What is GAP Insurance?
Guaranteed Asset Protection (Shortfall or Motor Equity Insurance) is an optional add on insurance or junk insurance product that should help cover the difference between insurance pay-out & your finance shortfall amount you have left on your loan, should your car get written off/ damaged in an accident or in the unfortunate event your car was stolen! The name GAP insurance really makes a lot of sense seeing as that’s exactly what it does; it covers you for the gap amount, Easy!
Sometimes the insurer can pay out less that what is remaining on the car loan, as it’s all about the equity of the car in the insurers eyes vs how much is left to pay off leaving a potential negative equity as the car may depreciate over time at a much faster rate than you can pay it off.
Now… this depends, if you have agreed the value of your car also the reverse can happen and you may get a much bigger pay out from the insurer than the car is worth, Winning!
Why was GAP Insurance Purchased?
Gap insurance is a product that should be offered as a choice when taking out a loan to buy a car. It is sold suggesting it will give you peace of mind if you were ever in the situation of not being able to cover the full amount owing on your car finance agreement and want to avoid and cover the event of having to pay off a car you no longer have! Now here’s the tricky part, it isn’t uncommon for lenders to sneakily add this extra product in to your original car loan paperwork as if it were part of the package, and not an optional extra cost. Or even worse, add the insurance in to the loan payments of your car finance amount totally unknowingly to you. Yes, this happens!
Examples of Mis-Sold GAP Insurance
Please find below some common examples of how GAP insurance can be mis-sold to consumers:
- Sold to clients who use their car for Rideshare, hire cars or fast food delivery work, which then voids the ability to claim in a range of car accident scenarios on the job
- Car dealers may automatically include some form of GAP insurance as part of the car loan without disclosing this to you
- Car dealers and/or their chosen financiers may include the insurance premium in the cost of the car repayment (which you are paying interest on) without informing you
- Car dealers may state that a car loan cannot be approved without the customer signing on for it, which is simply dishonest and not true, particularly as individuals may take out comprehensive motor insurance that covers the new vehicle replacement in the event of it being written off in an accident or stolen.
- Once the loan is completely paid off, it isn’t brought to the attention of the client that GAP insurance is no longer required
- There may have been a big deposit put down initially for the car, meaning it would have been impossible for the finance to ever need a Gap to cover!
How do I know if GAP Insurance was unknowingly added to my policy?
Unfortunately, one of the most deceitful forms of mis-sold insurance comes from lenders discreetly including it into your original loan documentation and paperwork without you knowing about it or having agreed to it. It is Australian Law that before you buy insurance you are provided the product disclosure document to read and understand. This will help you make a decision if the Insurance is right for you by choice.
Most consumers were never given these documents to risk highlighting the insurance they had paid for. If you were lucky enough to be given your Certificate of Insurance this should have an itemised listing of the insurance products you have purchased, along with important information such as:
- Your policy number
- Period of insurance
- Cost or Premiums
If the policy wording or the information proves to be confusing or unclear, you can contact your insurance provider and ask them to explain all of that itemised information in detail.
How do I claim back mis-sold GAP Insurance?
Thankfully this is where our industry expertise comes in! We take care of the entire claims process for you:
- Provide us with your details, including loan contracts if you can (If not we can help)
- We analyse these details and call you to finalise your claim
- We submit your refund claim(s)
- You get paid!