Vehicle total loss incidents are leaving many unable to afford replacement cars, even with comprehensive insurance policies.
According to GAP Insurance provider, ALA Insurance, 62% of drivers could not afford a like-for-like replacement vehicle using their comprehensive insurance payout alone despite 63% incorrectly believing that they would get what they paid for their car when written off via their comprehensive policy.
Even more concerning, 65% couldn’t afford a market-value replacement, revealing the substantial shortfall between payouts and real-world costs.
Some 25% of respondents said they were worried about the financial implications of a write-off – a valid concern with the frequency this occurs. If a vehicle is bought on finance an unlucky owner could find themselves without a replacement and still paying interest on the outstanding loan as well.
Jason Allen from ALA Insurance said, “Our research shows that a total loss can be financially devastating for most drivers. Comprehensive insurance often isn’t enough to cover the cost of replacing a vehicle, and many drivers are unaware of the options available to protect themselves from these shortfalls.”
The data paints a stark picture of the financial strain caused by total loss incidents:
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68% of drivers received payouts below £5,000, and 38% received less than £2,500, despite having comprehensive insurance.
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Only 16% received more than £10,000, and a mere 5% received over £20,000 for their written-off vehicles.
This financial strain is compounded by a lack of awareness about alternative protection options. The result of this is a substantial 42% of motorists viewing insurance providers negatively which is something awareness of appropriate coverage could mitigate.
GAP insurance is designed to cover the difference between a comprehensive car insurance payout and what you originally paid for the car, therefore the cost of a replacement vehicle.
Many drivers mistakenly believe comprehensive insurance offers full protection in the event of a total loss. The report found that 63% of drivers thought there were no financial shortfalls with comprehensive policies, despite evidence to the contrary.
What’s more, 49% said they would struggle financially if they wrote off their car today. Despite its potential to mitigate financial risk, GAP insurance remains underutilised. Only 35% of drivers have heard of it, and even among those aware, 85% have never purchased it.
