Auto insurance covers the financial liability of the car owners in case of an accident. However, these insurances are limited and will only cover certain liabilities. Here is when gap insurance comes into the picture. The gap insurance is an add-on insurance coverage that covers the financial gap between the car’s market value and the due loan amount in case of a total loss. That said, even after the car is totalled, the owners suffer no financial loss.
Let’s dive a little deeper into the gap insurance for cars and elaborate on what it brings to the table for the owners.
Gap Insurance Meaning
Gap insurance is an optional coverage offered with a car insurance plan. This type of car insurance in the UAE covers the financial damages when a car is totalled. That said, a totalled car refers to any vehicle that is stolen or gets damaged beyond repair. Although comprehensive car insurance also pays off, when the car is totalled, it only covers the market value. Aside from accidents, gap insurance also helps owners if a car’s value depreciates significantly due to multiple reasons. Here are some of the reasons that affect car depreciation.
Simply, the gap insurance plan will pay all your debts if the car is totalled. For instance, if you purchase a car through auto financing and you get totalled before paying off the loan amount. In this case, even comprehensive car insurance will pay the car’s market value. However, the gap insurance will pay off the gap between the car’s market value and the amount needed to be paid. Now that you know what is gap insurance, let’s move towards its inclusion reasons.
What Does it Cover
Similar to other types of car insurance in Dubai and other Emirates, gap insurance also has its criteria to cover the damages. That said, the gap insurance coverage is only effective when the car gets totalled due to the following reasons.
- When an accident occurs due to collision with another vehicle or an object
- Stolen and can not be recovered
- Car is damaged during riots or other man-made disasters
- Get damaged by natural disasters like hail or dust storm
Now that you know the gap insurance coverage criteria, here are some reasons when when gap insurance does not pay.
- Financial issues that hinder car owners from paying off the loan amount.
- Aftermarket modifications in the car
- Cars used for commercial purposes
- Vehicles that are used for professional motor racing
Please remember that the above-mentioned inclusion and exclusion reasons may vary from insurance provider to provider. For more information, read through our blog on things UAE car insurance does not cover.
Who Can Buy Gap Insurance in UAE
Insurance companies in the UAE have eligibility criteria for buying gap insurance. The following criteria are general and they may vary from insurer to insurer.
- The vehicle lease should be under the name of the applicant
- Must be Emirati or have a valid visa
- Have already bought a comprehensive car insurance policy
- Car’s age meets the maximum age criteria of the insurer
When Should I Buy Gap Insurance?
Although there is no specific time limit to buy gap insurance other than the car’s age, the car’s age is a vital aspect considered by the insurer. The older the car, the greater the chances of getting totalled, even by a small accident. Moreover, it also affects the gap between the loan amount and the car’s market value.
The ideal time for buying gap insurance is within 2 to 3 years of purchasing a car. That said, owners can buy gap insurance for both new and used cars.
Things to Consider When Buying Auto GAP Insurance
Following are some things to consider when buying gap insurance in the UAE.
Claim Condition
Gap insurance can only be claimed if the vehicle is completely totalled or damaged beyond repair in an accident. The right rule of thumb for the damage is that if the repair cost is more than the vehicle’s market value, it will be considered totalled.
Cancellation Clause
Regularly check for the market value; once the market value is higher than the loan amount due, gap insurance is not required. Therefore, carefully read the cancellation clause and exclude it from the plan after the limit.
Lease Contract
Ensure that the lease contract does not include gap insurance. If it is, then buying additional gap insurance is not recommended.
Renewal
Some insurance providers offer gap insurance renewal annually. However, only opt for the renewal when the loan amount of the current year has been paid. If you are negative in loan amount, renewing gap insurance is not recommended.
Availability
Generally, gap insurance is included as an add-on benefit and is not offered with all types of insurance plans. Moreover, certain dealers also offer gap insurance if the vehicle is purchased from their dealership. If you still have questions about the insurance, here are car insurance FAQs that might answer them.
FAQs
How does gap insurance work on stolen cars?
If your car is stolen and is beyond recovery, the gap insurance will cover all the damages.
Is gap insurance worth it on a used car?
Yes, it is worth it if your car is 2 to 3 years older. Cars older than 3 years generally have higher market value and are not covered by gap insurance.
Is gap insurance the same as full coverage insurance?
No comprehensive insurance covers liability and collision; whereas, gap insurance pays when the car is totalled or stolen and the auto loan amount is still remaining to pay.
What is the fine for driving without car insurance in UAE?
The fine for driving an uninsured vehicle in the UAE is AED 500 and 4 black points.
What is the validity of car insurance in the UAE?
Generally, car insurance plans in UAE are valid for 12 or 13 months, including a one-month grace period for renewing the insurance plan.
This was all about gap insurance and the vehicles it covers. Gap insurance protects car owners from significant financial dents in case of an accident. Since repairing a car can cost you a fortune. However, the premium of gap insurance is usually higher, and owners are also required to cater to certain conditions. That said, if your car gets totalled without a gap insurance, it is more feasible to opt for used cars for sale in the UAE and buy a car as per your budget.
Besides, if you buy a car from dubizzle, you can also leverage a number of value-added services by dubizzle cars including an insurance plan.
Stay tuned to dubizzle’s auto blog for more information on insurance plans.
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