For a richer life

THE QUESTION

I bought a renault Car on HP which is now paid off. I bought it in Sept 2006 and traded in another car. The HP was approximately £3000 but the company put a gap insurance on it. I felt it was pushed on me, am I able to claim it back? Thanks Wendy

Wendy Bentick, Coventry

THE ANSWER

Hi Wendy, GAP insurance is often added to hire purchase agreements. This is because if you have an accident and write off your car before the end of the hire purchase agreement, your car insurance company may only pay you what the car is worth at that point in time.  Because cars depreciate, this may be less than what you owe the hire purchase company.

For example, if the car was originally £4000, and you crashed it after paying off £500, but your car insurers decide that at the time of the accident, your car was only worth £2000, the GAP insurance would cover you for the £1500 difference. GAP insurance can be very useful, but it’s not compulsory, so if you were told you had to have it, you’re right to complain.

We spoke to Martyn James at the Financial Ombudsman, who told us he had seen an increase in complaints about this type of insurance. He says the first thing you should do is to make a complaint, in writing, to the insurance broker, or GAP insurance company who arranged the GAP insurance for you in the first place. Simply say that you are unhappy because you feel the insurance was pushed on you.

If this doesn’t work, your next port of call is the Financial Ombudsman. You can call their helpline free on 0800 023 4567. If you’re not confident making the initial complaint to the insurance company, they will help you with this too.

It’s worth noting that although there are similarities between GAP insurance and PPI, it is a separate issue. Unlike PPI, there has been no court ruling specifying that customers who have been mis-sold GAP insurance must be compensated, and no there is standard complaints form, but don’t let this hold you back.

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