What is GAP insurance for schools in the education sector?
What does GAP stand for?
GAP stands for Guaranteed Asset Protection. Saying that, if you are in the vehicle business they say it stands for Guaranteed Auto Protection! People often refer to it as the financial gap between what an insurance policy will pay out and the original asset value.
What is GAP insurance?
It is an insurance policy that will pay the difference between the original value of an asset (a car for example) and what an insurance company will pay out for a second-hand used asset.
In the education sector, GAP insurance is an insurance policy that will pay the proportional difference between an outstanding lease commitment and what a parent has paid by way of a parental contribution. i.e. a parent terminates their payment of a direct debit and hands back the digital device to the school. The school has to carry on paying the lease, buy has lost the corresponding contribution revenue stream from the parent.
How much does it cost?
Prices vary, but normally about 5% of the device value.
Is GAP insurance good value for a school?
No. This is our personal opinion and it may well be your school circumstances are such it would be a great product for you. Edde and its employees do not sell this product and do not hold ourselves out to be experts on GAP insurance. Likewise, we have not reviewed the policy wording of other companies selling GAP insurance into the education sector and our beliefs are based on our historic knowledge of the product.
Why we feel GAP insurance is not necessarily a useful product for a school
We feel it is very expensive and hidden in the small print are exclusions that make it not worthwhile. i.e. if a parent has lost their job or becomes sick, then yes, the policy will pay out. However, the chances of this are small and most schools believe the policy will pay if a parent just decides for financial reasons to stop paying their contribution. We believe most policies will not pay out for this reason.
In the past, we have heard of situation where GAP insurance policies have been mis-sold to schools.
What is a better solution than GAP insurance?
Most schools we speak to wish to implement a digital classroom mobile learning solution without any financial exposure or risk to the school. There are other companies offering a similar service to edde, promoting their offering as “risk free.” We have various ways of reducing risk, but feel this is would be mis-selling to say any parental contribution scheme can be risk free.
So, the options to a school are:
- Do nothing. Respect the fact there is a chance some parents will not pay a contribution
- Ask all parents to contribute a little bit more to cover any contribution arrears, hence making sure the scheme is cash neutral. (i.e. the contributions collected are the same value as either the capital cost of the equipment or the total of the lease repayments.)
How can edde help?
We have developed our own product called Contribution Care (Guide coming soon). It is a way for our education customers to increase parental contributions to cover and contribution arrears. Please call edde for more details on 01494 611 465.