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GAP Insurance

Protect your car's value if it is stolen or written off:- If you have a car stolen or declared a total loss, the payout by a standard insurance company may not cover what you originally paid, or even the finance you may still owe. An insurance company that offers GAP insurance (Guaranteed Asset Protection) will make up this shortfall, so you won't be out of pocket.

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What is GAP Insurance?

GAP insurance covers the difference between the current market value of your car (what your standard insurer will pay) and the price you originally paid, or the amount you owe.

Because cars depreciate so quickly, and you might need to make a very expensive outlay to cover a new or financed vehicle, this extra protection could save you thousands. GAP insurance is optional, but it offers real peace of mind.
It could be useful to you because your insurance provider may only pay out what it is worth at the time of the incident. Bridging the financial gap could help cover the lost cost of buying a new vehicle or pay off the amount still owed on a car bought on finance.

How quickly does a car depreciate?

Depreciation depends on the market, model, etc., but a new car will lose 15-35% of its value in the first year and more than half its value within 3 years.  Without GAP cover, the shortfall could be very substantial in the event of a crisis.

What’s happening with GAP Insurance?

In 2024, the Financial Conduct Authority (FCA) paused selling GAP insurance UK in the meantime while they reviewed value for money. After the new regulation (detailed product information, 4 days to decide, a cooling-off period before purchase), many providers have been allowed to sell GAP insurance again. This will mean better protection and transparency for drivers.

How much does it cost?

Prices will vary according to:

Make, model, and age of vehicle

The newer or higher the value of your car, the more to insure.

Length of policy

Usually 1 to 5 years, usually for as long as your finance term.

Type of cover

The more comprehensive the cover, the more it will cost.

The best way to get a quote that fits your budget is to compare quotes.

Types of GAP Insurance

1. Finance GAP

Clears any remaining finance, should your insurer's payout not cover it. This means you won’t be left making payments on a car you no longer have.

2. Return to Invoice

Provides a top-up to the Insurer's payout that equals the original purchase price. It helps you recover the exact amount you first paid, not just the depreciated value.

3. Return to Value

Covers the difference back to the car's brand-new value, even if it was bought used. Ideal if market prices rise and you’d like to buy a similar model again.

4. Vehicle Replacement

This covers the new price of the exact model and specification of your car, even if the price has gone up. It may be useful if you negotiated a discount with a dealer at the time you originally bought the car.

5. Negative Equity Cover

Covers the shortfall if your car value drops below the amount owing, leaving it worth less than the loan you’ve taken out on the car.

6. Lease Cover

Protects from pre-determined repayments that come with your leasing agreement. It may also include the early repayment charge and sometimes even the deposit you paid at the beginning of your contract.

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What’s not covered by GAP Insurance?

Like any insurance, GAP cover also has limits. Common exclusions include:

1. Third-party only policies

You must have comprehensive car insurance.

2. Illegal activity

No cover if you drove the car illegally, e.g., without a driver's license or under the influence.

3. Vehicle age or mileage limits

Older or high-mileage vehicles, and in some instances, luxury vehicles, may not be covered.

4. Partial damage

Only applies if the car was stolen or written off as a total loss.

5. Unauthorised drivers

If a non-named driver caused the loss, the claim is likely to be declined.

6. Business or commercial use

Generally, you exclude vehicles used for hire, delivery or motorsport.

7. Insurance deductions

Will not cover unpaid premiums or daily premiums that your motor insurer may be deducting.

8. Aftermarket modifications

Normally excluded are upgrades fitted after purchase that are not standard.

9. Valuation limits

Many providers only cover vehicles referred to in the Glass's Guide.

How do I get cheaper GAP Insurance?

While options may be more limited at the moment, there are still ways to help lower the cost of your GAP insurance:

Choose the correct cover

A straight return-to-invoice or finance GAP plan may be cheaper to purchase than a vehicle-replacement policy.

Compare quotations

Comparing online and shopping around can lead to obtaining better value deals.

How does GAP Insurance work?

GAP insurance covers the difference between what your car is worth in today’s market (covered by your comprehensive insurer) and what you paid, or
owe, if the car is stolen or written off, under your comprehensive insurance.

Buying a policy

You must buy it within 12 months of buying your car, and you need comprehensive car insurance before arranging it. Policies run from one to five years.

Making a claim

1. Claim on your comprehensive insurance

The insurer has confirmed the car is a total loss and offered to pay you a market-value settlement.

2. Contact your GAP provider

You need to submit the relevant documents and take note of the time limit.

3. Finally, you will receive two payments

One from your motor insurer and a top-up from your GAP provider to cover the gap. If your car is financed, the GAP payout might go directly to the lender - check your agreement.

If you financed your vehicle

If you have financed or leased your vehicle, make sure to confirm whether the gap payout will be sent to the lender or to you. This will depend on your lender and your agreement, as there can be differences between lenders. Always read your agreement thoroughly.

If issues arise with your claim

If your claim for GAP insurance is declined, or you are unhappy with the outcome, you should start with your insurer's complaint procedure.
Ideally, you will get some traction. If you still feel unhappy, you can take your case to the Financial Ombudsman Service, which will review it for free and as an independent service.

Lease GAP (Contract Hire GAP)

This type of cover is specific to leased vehicles and can help pay the outstanding lease payment, early termination charges, and, in some cases, any initial deposit.
If your claim has been declined, follow your insurer's complaints process, and escalate to the Financial Ombudsman if necessary.

Alternatives

An agreed-value policy offers an amount to pay out from the start and will not take depreciation into account. This is most suited to classic cars or very valuable cars, but it tends to be more expensive, and fewer insurers provide this option.

Frequently Asked Questions

Is GAP insurance just for new vehicles?

No, some insurers will cover a used car if it meets certain age and/or distance limitations.

Yes, you can typically arrange GAP insurance for a new vehicle, usually within 12 months of purchase, if you have a full comprehensive proposal.

That will depend on the type of policy and the age and value of the vehicle. Please check for your provider’s payout cap prior to purchase.

Yes, if your comprehensive insurer has declared your vehicle a total loss and you are not in breach of your GAP insurance policy, you will be covered.

Most providers will give you a cooling-off early cancellation period of between 14-30 days, during which you can cancel and receive a full refund.