How to Decide the Right Claim Limit?

Gap Insurance for Motorbikes.

The importance of deciding on the right claim limit.

A claim limit is the maximum amount that you can claim from your Gap Insurance policy to cover any claim you wish to make.

However a large majority of drivers are unaware of the importance of the claim limit.

Given that you are taking out Gap Insurance, just like every type of insurance, with the hope of never having to use it, when drivers come to deciding on the claim limit, they often undertook the importance.

The majority of Gap Insurance providers offer the following claim limit options: £5,000, £7,500, £10,000, £15,000, £20,000, £25,000.

In theory, the higher the claim limit option you choose, the more you will pay for your policy.

However, and please do consider this carefully, the difference in price, in most cases, between a £5,000 policy and a £25,000 policy is on average £20-£50.

And in most cases, as I have previously explained, the driver will choose the lowest claim limit to avoid paying the extra £20 pound.

This article has been designed to help you understand that by paying this extra £20 for example, it could possible save you from paying £5,000 in the near… or more.

Please see the following illustration.

Please note that the names and figures used in this article have been designed for this article only.

  • Alex purchases a Harley Davidson for £20,000.
  • Alex takes out Gap Insurance, as well as the comprehensive insurance.
  • Three years down the line, his motorbike is stolen through no fault of his own.
  • Alex goes through the typical insurance procedures and receives a settlement payment of £10,000 as this was the market value of his motorbike at the time it was stolen.
  • This means that Alex’s motorbike has depreciated by £10,000.
  • Alex now in theory has a loss of £10,000, through no fault of his own.
  • However Alex was protected by Gap Insurance with a claim limit of £10,000
  • This means that Alex received the outstanding £10,000 which returned him back to the original invoice price.

However this story could have been different if Alex had chosen a £5,000 or £7,500 claim limit.
If he had, that would have been the maximum he could have claimed, leaving him still with a financial loss.

When choosing your claim limit, the best tip is to always go high.

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