Neil and Denise's story - gap insurance
Neil and Denise talk about their struggle to get a full payout on their gap insurance policy.
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Julia Somerville: Neil and Denise had never heard of gap insurance until five years ago Denise bought a second-hand car on finance and immediately afterwards the dealer rang suggesting gap insurance was something she’d need.
Denise: I asked them what the gap insurance was and they explained that any loss on my vehicle, it would…it pays the difference, the outstanding difference, to the finance company. I took the policy out because it wasn’t expensive.
Julia Somerville: Of course they hoped nothing would ever happen to the car, but, three years later it did.
Neil: In August we got a phone call from the police saying that the car had been set on fire.
Julia Somerville: The unprovoked arson attack totally destroyed the car.
Neil: Denise was gutted. It was her pride and joy like, you know. She used the car nearly every day.
Julia Somerville: At the time, Neil and Denise owed £6,064 to the finance company. £4,475 of that was quickly paid off by their insurance company. And they were confident that the remaining shortfall of £1,589 would be paid off by their gap insurance. But, much to the couple’s surprise, the policy only paid just over half of that, leaving them with £738 still owed. The gap insurer refused to pay the full amount because they said that when Denise had bought the car she had paid more than the market value. So, they considered the difference to be negative equity and not their responsibility.
But, Neil didn’t agree. He had a look at his insurers website and found a big gap between the way that the insurance was described in the paperwork he was sent and how it was explained online.
Neil: When we actually the got the documents, the terms and conditions in it were so awkward to understand. When I looked at the website, it was……it was dead clear. It made it look as though it was two different policies.
Julia Somerville: The website wording seemed clear that the policy would pay the outstanding balance at the time of the loss to the finance company. So, armed with this information, Neil took his case to the financial ombudsman service.
Neil: The adjudicator came out on our side and said that we were right and that the gap insurance should have paid the correct amount and hadn’t.
Quick tips for tutors
A short video that looks at gap insurance and the problems Neil and Denise faced when they had to make a claim on their policy. Although the policy seemed straightforward when viewed online, the terms and conditions they later received in the post were extremely difficult to decipher.
May be used in class to stimulate discussion around the featured story. Alternatively could be used to introduce the following topic(s):
Reading and understanding
Skimming and scanning