Vehicle total loss incidents are leaving many motorists 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.
Jason Allen from ALA Insurance comments, “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.”
Millions Left Struggling By Small Payouts
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.
Worryingly, 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.
Jason Allen added, “Car dealerships remain the primary source of GAP insurance information, cited by 54% of those aware of the product. This suggests that many drivers are missing out on vital education about how they can protect themselves financially.
“We encourage all drivers to review their insurance policies and consider whether they are fully protected against the unexpected. GAP insurance can be the difference between financial hardship and peace of mind after a total loss.”