Gap Year Insurance

Why Insuring for a Gap Year is a little different…

Visiting far away places on a shoestring is a popular way to fill a year before going to uni, but it also can include shorter trips of just a few weeks and is not just for the young. Many older people take gap years before starting their careers as well as mid career. The trip itself can be structured with every destination planned or an ad hoc journey with no real idea of the next place to go until the last minute. Working or volunteering may be a part of the plans.

All these factors have an impact in the type of travel insurance that is taken. If volunteering is not mentioned when taking out cover and teaching in Botswana for a few weeks is the reason for the trip, the the insurance company can void the whole policy.

What you MUST tell the insurer!

  • WHERE YOU ARE GOING

This is not as obvious as it first looks. While a lot of gap year trips are planned and have an itinerary, many do not. It may be that backpacking around Cambodia lost its magic earlier than expected and an impulse excursion to Thailand suddenly happens. Fortunately, for insurance purposes, the world is divided into regions. Typically this works out as UK, Europe and worldwide (including and excluding North America). When telling the insurer where you are going, you must be as precise as possible, but if you are not sure of the exact countries you must make sure you get the region correct.

  • HOW LONG ARE YOU GOING FOR

You will probably have a fixed time planned, but it is always worthwhile adding a few days for insurance purposes. This then takes into account any last minute changes of plans or unexpected delays. Trying to extend cover once it has run out is extremely difficult. Almost all insurers will only commence cover before your trip. Once you are out of the UK, setting up travel insurance is nigh on impossible.

  • WHAT ARE YOU GOING TO DO ON THE TRIP

Working, volunteering, extreme (and not so extreme) sports are all examples of things that you must tell your insurer. Not telling them can, and probably will, invalidate the whole policy. On a darker note, be aware that like any insurance policy, cover will be withdrawn for any insured event if you can be shown to be under the influence of alcohol, non prescribed drugs or have broken any of the local laws.

  • ANY MEDICAL PROBLEMS

    In addition to fully disclosing any existing medical issues, you must have any recommended jabs for the country or region you are visiting. If you don’t, you run the risk of the insurer not paying out if you contract a disease you could have been inoculated against. Always talk to you GP about injections well before your trip.

In a previous post, I did a “Top Ten Tips” These are worth a visit, but here are a few more practical tips for gap years:

  1. Talk to a broker or insurer that specialises in this type of cover.
  2. Read all the small print. Pay particular attention to the exclusions, excesses, medical cover limits and property cover limits.
  3. Check if cameras and phones etc.. are already covered worldwide by your existing home insurance.
  4. Write down (and leave behind!) the serial numbers of all gadgets. Back up any information on them before you leave.
  5. Give the insurer authority to speak with someone other than you. If you are unable to talk to them for any reason, it makes life so much easier.
  6. Photograph the insurance documents so they can be easily accessed on your phone. It’s a good idea to take a small, cheap phone as a spare. in case yours is lost, damaged or stolen.
  7. Leave a copy of the insurance documents at home with someone.
  8. Write down your most important contact numbers.

 

What Is A Warranty?

As we are in the busiest time of the year for buying electrical goods such as mobile phones, games consuls, TV’s and everything else that has a plug on it, it is also the busiest time for retailers to sell extended warranties. These are guarantees that give you greater cover against damage or breakdown than the guarantee that usually comes as standard with the item you have bought.

They can come as a product that is bought at a one off price at the time of purchase or can be a monthly payment that lasts as long as the warranty is designed to run. They can be specific to the item you have bought, or can offer “blanket cover” over several qualifying items. One thing they all have in common is that they are all a bit different!

Before you agree to buy an extended warranty on anything you need to find out a few things:

  1. What does the guarantee that automatically comes for free with the item cover and for how long? You may well be happy with having that.
  2. Is the cost of the warranty worth it? I once bought an iron for £20 and the optimistic salesperson tried his hardest to sell me the £15 warranty.
  3. What does the extended warranty actually cover?

    Let’s look at these a little more closely.

    What does the guarantee that automatically comes for free with the item cover and for how long?

Most things you buy in this country come with some form of guarantee against it breaking down or developing a fault. Although this seems straightforward, there are things you should be aware of. Firstly, it relates to things bought in this country. Online purchases made from abroad or even purchases while you are in another country may not have the same protection as you can expect from buying in the UK. As a general rule, it is a wise move to make such purchases with a credit card as that will give further protection to you if things go wrong. The Money Advice Service gives a good summary of how this works, click here to read it.

The next thing to look at is how long is the guarantee? One year is quite common, but by no means can this be taken for granted. Any period is possible, and obviously, the longer the better! If the item has been “refurbished”, “display” or is sold as “seconds”, the guarantee may only be a month. It still should be of merchandisable quality though and you should enjoy the same consumer rights as if it were sold as new.

A lot of guarantees require you to fill out a registration card at the time of purchase so you can easily be found should you get in touch. I’m sure that acquiring names and addresses for marketing purposes doesn’t even cross their minds. If you do not fill out the registration, it can make claiming on the guarantee more long winded and awkward, but it should still be honoured, so be persistent.

Although Guarantees have a lot in common and meet broadly similar minimum standards, they can, and do, have wide variations. It should be treated as a legal contract and as such you should read what is in it. If there is anything in it you do not understand, then you should ask about it before purchase. Citizens Advice have a page devoted to The Consumer Rights Act 2015 which is well worth a visit

Is the cost of the warranty worth it?

Seriously, this is a matter of common sense. If you are buying an item that you can easily afford to replace if you accidentally throw it at the telly while watching England getting knocked out on penalties again, then don’t spend anything on a further extended warranty. You may have an accidental claim on the telly through your insurance though.

If it’s a warranty that you are going to pay for monthly, then add up the total to see if it is worth it. Often the retailer is getting a commission for selling the extended warranty. knowing this, I have occasionally used this to my advantage and got the price of the item reduced. certainly doesn’t work every time, but it has worked, and if you don’t ask – you don’t get!

When working out the value of the warranty, it’s not just the price you should consider. There will be a long list of terms and conditions on the contract and it really is down to you to read them and decide whether or not to run with it. These terms and conditions will set out the circumstances that the item can be repaired or replaced and who meets the cost of getting the item to and from the repairer. Do not assume anything. If its written in the forms, then that’s what they will refer back to. if it’s not written in the forms, then they will argue the point.

What does the extended warranty actually cover?

The big print will refer to breakdown and damage amongst other things. The small print will specify which parts qualify and which parts won’t, there can also be maximum cash limits and time limits. The fact of the matter is that you will be offered an extended warranty with no more than a “Would you like the warranty, it costs xxxx amount” If you buy it on that basis, you really have no idea what you have just bought and as the chances of a potential claim arising is very low, the chances of you paying for something you do not need and is no use to you is highly likely.

The events that are covered are set out in the warranty paperwork, you must read it as every one is slightly different. Most are “Service Agreements” rather than “Insurance” products and as such they are not regulated by the Financial Services Authority.

What can I do to make a good decision?

The main thing you can do is not buy it until you know exactly what you are buying. Be awkward and ask questions and ask to see the relevant paperwork that confirms what you are being told. The Money Advice Service has written an excellent piece on extended warranties which I recommend you read. There is also an online comparison website which is a really useful tool when deciding whether to buy one or not.

Should Social Media profiling be used to determine Insurance Premiums?

Facebook Prevents Insurer from using Posts to influence Premiums

Today was supposed to be the launch of a pilot scheme by the insurer, Admiral, whereby they would ask to view the potential insured’s Facebook posts and then make a judgement as to the lifestyle and behaviour of the person and then offer a premium that was influenced by their judgement of that person.

Admiral had stated that it would analyse the accounts of first-time car owners, including what they were posting and things that they had “liked”. From this they would then build up a profile and determine whether they were likely to be safe drivers and offer discounts as a result.

Facebook has, at the last moment, pulled the plug on this. Probably because it realised that it could be embroiled in the considerable number of disputes and complaints that was sure to follow from such a subjective idea.

There are so many reasons why this crazy plan should not have got even this far. However, it does highlight the lengths insurers are prepared to go to in order to gain an edge in a market. Even if that market is as notoriously difficult to turn a profit from as young drivers.

My suspicion, having been around insurance companies for a while, is that some senior executives who wanted to appear hip, have ill advisedly listened to some trendy junior executives who have told them that the future is all about social media. In order to appear to be “on trend”, like your bachelor uncle who wants to take you to a Drake gig, said senior executives suspended their experience and, more importantly, common sense and ran with the idea.

While the pitfalls of this nonsense are pretty much self evident. It does invite closer thought. Long before social media was even a term, I was broking motor insurance. At that time, potential clients would either phone or drop in and complete a form from which a premium was calculated. But even then then problems would arise. It wasn’t common, but then again not that unusual for someone in the office to declare that they had some knowledge of the potential client that had not been declared. I have been told on more than one occasion that someone was not declaring their address properly, or not mentioning their part time evening job, in order to get a cheaper premium. How did they know? They lived next door to the person and knew they had moved months ago or saw them going to work every night!

Realistically speaking what actually is the difference between an insurer finding out “relevant” information from a third party as happened years ago and finding out such information from social media?

The point is that social media provides the type of information that all businesses will give their right arm for and whereas most people will resist attempts to give information if they think it will be used for marketing, most will be happy to volunteer such information, and a lot more, in a social media post.

Probably all young people are warned that potential  employers are likely to look at their social media profiles prior to being interviewed, and the more savvy ones will moderate what they post and who they let see it. The next level will be the use of social media profiling for commercial purposes, there is a good argument for saying that it is already here.

Perhaps Admiral’s biggest mistake was not trying to exploit social media, but just being too up front and honest about it. Even more of a mistake is the kind of information people are just thoughtlessly putting online for the world to see.

 

Further details of this news story can be found by clicking here and more information about car insurance and the use of Black Boxes here 

Gap Insurance Explained

Just what is Gap insurance?

It’s Guaranteed Asset Protection insurance. There you go…clear, simple and easy eh?

No.

It’s a bit more complicated than that. I know, unusual for an insurance product but what can I say…

Although there are some variations, in the main, Gap insurance seeks to fill the shortfall that may occur between the value of your car and the amount you may receive from an insurance company if your car is written off.

“What shortfall” I hear you cry…

It’s a fair question. It is a common belief that when you take out car insurance the question about “How much is the vehicle worth” has a bearing on how much you are likely to be paid if your car is written off. Invariably, this is not the case and it is more likely that the value you give will have more influence on the premium charged than the amount that you will get after a major accident. (Do not, however, fabricate the value of your vehicle in order to get a lower premium, this is a very bad thing to do and may invalidate the insurance and even lead to proceedings for fraud!)

If your car is written off, in the vast majority of cases, you will be offered the “market value” of the vehicle. This can be a contentious figure, and if you find yourself in this position, you should never be shy in questioning the insurer as to how they reached their offer and to argue your point if you believe you have a fair one.

The shortfall typically arises, particularly with a new car, when a write off occurs relatively soon after buying the car. I think we all understand that the value of a car declines at its steepest as we drive it, shiny and new, off the forecourt. The “market value” can easily be several thousand pounds less than the price paid new. Gap insurance is designed to dovetail with your comprehensive insurance cover so that the overall payout you receive from both added together is more akin with what you believe will be the replacement cost of the vehicle.

What are the variations of Gap insurance?

Broadly speaking, the different variations of Gap insurance all aim to put you back into the financial position you were before your claim. However, because there are different ways of buying a car, variations have evolved to meet specific needs. Here are the main ones:

 

What are the different types of Gap insurance?

The Gap insurance market can be complex, with different providers offering their own unique products. Some of the most common policies are listed below.

“Return to invoice” Gap insurance

This is straightforward. The Gap insurance will pay an amount that will top up the main insurance payout to the amount that you bought your car for. Unsurprisingly, they will ask for a copy of the invoice.

“Return to value” Gap insurance

Similar to “Return to invoice” but instead of topping up to the amount you paid, “Return to value” will top up to the value of the car at the point of purchase. This can be of benefit if you have had the car a while, but moreso if you bought the car second hand.

“Finance” Gap insurance

This is probably the most basic and common forms of Gap insurance. It aims to help you clear any loans, finance or associated costs in the event of a claim.

“Lease” Gap insurance

If the car is leased and written off, this type of gap insurance is designed to help you pay the remainder of your contract and any early closure fees that may be applied for ending the arrangement early.

“Vehicle replacement” Gap insurance

Instead of paying an amount that will help you get to the figure you originally paid for your car, this is designed to bridge the gap between the main insurance payout and the cost of buying a new car. A lot of dealerships offer this type of product and include cover bor borrowing as well.

 

Should I take out Gap insurance?

As with all insurances, it is down to you to decide whether the cost of the cover and benefits offered are worth what you are being asked to pay for it. The chances are that you will be offered some type of Gap insurance when you buy your car. The best idea, as always, is to read the details of what you are being sold and then shop around to see what is available from the rest of the market.

Gap insurance is something to think about whilst not having an accident
Gap insurance is something to think about whilst not having an accident