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Does GAP Insurance Cover the Full Value of the Car?


GAP Insurance, or Guaranteed Asset Protection insurance, is a topic many car owners may question.

 

Understanding how GAP Insurance works helps you decide whether or not it is for you.   Does GAP Insurance cover the full value of a car?

 

So let's start by addressing the question that is the title of this article.

 

Does GAP Insurance cover the full value of the car?

 

It depends on several things.

  • What do you mean by 'full value'?
  • Which type of GAP Insurance policy do you have?
  • How have you bought or secured the car?  


What is GAP insurance?


Guaranteed Asset Protection (GAP) insurance is a specialised type of insurance designed to cover the difference between the market value settlement from your fully comprehensive car insurance provider, should they write off the car as a total loss, and depending on which type of GAP Insurance you have:

 

  • the original invoice price you paid
  • the cost of an equivalent replacement vehicle
  • the outstanding lease settlement
  • the outstanding finance settlement
  • the value of the car on the day you bought GAP cover

 

To answer the question, we will look at each type of GAP product and provide an individual answer for each.

 

Before we begin, we should point out that any GAP claim must be made following your main motor insurer writing off the vehicle and paying our the then market value as a car insurance payout.

 

GAP protection is not a substitute for fully comprehensive car insurance. All forms top up the car insurance settlement.  

 

Types of GAP Insurance


1. Finance GAP Insurance

 

Finance GAP Insurance is designed to cover the difference between your outstanding finance agreement and the car insurer's market value settlement of your car.

 

It helps ensure that you don't owe more to the finance company than your standard car insurance provider pays out.

 

Does Finance GAP cover the full value of the car? - No

 

It only covers any shortfall between the comprehensive car insurance policy settlement and the outstanding finance settlement.

 

2. Return to Invoice GAP Insurance (aka Back to Invoice)

 

Return to Invoice GAP Insurance, also known as Back to Invoice, RTI GAP insurance or Retail Price Protection, covers the difference between the insurance payout and the original invoice price of your car.

 

It aims to settle your finance outstanding and return the balance up to the invoice price you originally paid to you.   Full car value GAP Insurance

 

Does Return to Invoice GAP cover the full value of the car? - Yes

 

Since 'full value' means the price you first paid for the car, this is covered.


3. Vehicle Replacement GAP Insurance

 

Vehicle Replacement GAP Insurance covers the cost of a brand-new replacement car if your vehicle is written off or stolen.

 

It pays the difference between the insurance payout, and the cost of an equivalent replacement car of the same make, model, specification, age and mileage as yours was when you bought it.

 

So if yours was a brand new car when you bought it, then the equivalent is a brand new replacement when you claim. If your car were one year old with 10,000 miles when you purchased it, then it would be the cost of a one year old, 10,000 example of that car when you make a claim.

 

Does Vehicle Replacement GAP cover the full value of the car? - Yes

 

Because 'full value' means the amount you need to replace the vehicle with the equivalent one you first started with, even if this price has increased.

 

4. Lease GAP Insurance

 

Lease GAP Insurance, also known as Contract Hire GAP Insurance, is designed for individuals who have leased a car.

 

It covers the difference between the insurance payout and the amount required to settle the lease agreement, ensuring you don't continue to owe money on a car you no longer have.

 

Does Lease GAP cover the full value of the car? - No

 

Lease GAP helps you cover any shortfall on the lease settlement if the vehicle is written off. With a lease, you do not have the option to buy the car, so Lease GAP will not cover the full value in any case.  

 

5. Negative Equity GAP Insurance

 

Negative Equity GAP Insurance covers the difference between the insurance payout and any outstanding finance settlement, including any negative equity from a previous car that was rolled into the new finance agreement.

 

This type of GAP insurance is specifically designed if you have negative equity from a previous vehicle purchase.

 

Does Negative Equity GAP Insurance cover the full value of the car? - No

 

Negative Equity GAP only covers a finance shortfall on your credit agreement. It will not provide anything more towards the vehicle value.

 

6. Agreed Value GAP Insurance

 

Agreed Value GAP (aka Return to Value) is designed to cover you between the motor insurers' current market value settlement following your car being stolen or written off and the vehicle's value on the day you bought the policy.

 

A valuation service like Glass Guide generally defines the' agreed value'. Agreed Value GAP is ideal for private or auction purchases where the vehicle has not been bought from a VAT-registered motor dealer.

 

Does Agreed Value GAP cover the full value of the car? - Yes

 

If the full value is the agreed value at the start of the GAP policy, then this type of GAP cover can cover back to that full value.    New cars best value GAP Insurance

 

What is the 'full value' of your car?

 

When customers as, 'Will it cover the full value of the car', then it is clear they may have a different idea of what they mean by 'full value'.

 

GAP insurance is designed to provide financial protection when your car is written off or stolen, and the payout from your standard car insurance provider doesn't cover the value of your vehicle or the outstanding finance.

 

When you file a GAP insurance claim, the policy covers the difference between the insurance company's payout and one of the following, depending on which one of the GAP insurance policies you purchased:

 

  • - The original invoice price of your car (Return to Invoice GAP Insurance)
  • - The amount required to settle the finance agreement (Finance GAP Insurance)
  • - The cost of a brand-new replacement car (Vehicle Replacement GAP Insurance)
  • - The amount needed to settle the lease agreement (Lease GAP Insurance)
  • - The outstanding loan payments from a previous car (Negative Equity GAP Insurance)
  • - The value of the vehicle on the day you bought the GAP cover (Agreed Value GAP)

 

By deciding which type of coverage you need, you can decide if GAP Insurance is worth having. You can then get a GAP Insurance quote for the appropriate cover.  


FAQs related to Does GAP Insurance cover the full value of a car?

 

What does GAP insurance cover?

 

GAP Insurance provides financial assistance if your motor insurance company write off the vehicle after it has been stolen, in an accident, set on fire or suffered a flood.

 

Your GAP cover will top up the market value settlement from your car insurance company.

 

As detailed above, how much the GAP policy will top up your settlement depends on which type of GAP Insurance you have taken.

 

However, which type of GAP protection you take or is available to you will dictate whether it will cover the full value of your car.

 

What does GAP Insurance not cover?

 

Like all insurance products, GAP cover has terms, conditions and exclusions. Some of which can result in you not getting the protection you may expect.

 

They can also mean that even when you think the vehicle's total value is covered, you may find some or all of your claim reduced.

 

Typical GAP Insurance exclusions or deductions

 

  • - Wear and tear, mechanical or electrical breakdowns, or damage not considered a total loss by your standard car insurance provider
  • - Any amount deducted by your car insurance provider for contributory negligence, salvage value, or other policy-related factors
  • - Any additional costs added to your finance agreement after the policy inception, such as payment protection insurance or other add-ons
  • - GAP insurance may not cover your car insurance policy's excess, which you must pay before processing your car insurance and GAP insurance payouts. Most GAP products contribute to your excess deducted, but it may be only part of the excess charged.


Do you need GAP insurance?


This is really your choice. GAP protection is not compulsory insurance, like car insurance. No one can force you into taking GAP cover out.

 

Determining whether you need GAP insurance depends on several factors. Consider the following when deciding if GAP insurance is right for you:

 

  • - The rate of depreciation for your vehicle: New cars tend to depreciate quickly, with some losing up to 60% of their value within the first three years. GAP insurance may be beneficial if you own a new car or a vehicle with a high depreciation rate.
  • - Your finance agreement: If you have a substantial outstanding balance on your car loan or lease, GAP insurance can protect you from financial losses should your car be written off or stolen.
  • - The terms of your standard car insurance policy: Some comprehensive car insurance policies may already provide a form of gap coverage, especially for new vehicles. Check your existing policy to avoid paying for duplicate coverage.

 

How much is GAP insurance?         New cars SUV GAP Insurance

 

The cost of GAP insurance can vary depending on several factors, such as the value of your car, the length of your policy, and the provider you choose.

Here are some tips for finding cheaper GAP insurance:

 

  • - Shop around: Obtain quotes from multiple GAP insurance providers to compare prices and coverage options.
  • - Consider buying from an independent provider: While car dealerships often sell GAP insurance, their prices can be significantly higher than those of independent providers. Research and compare prices before committing to a policy.
  • - Don't assume comparison websites are the best option: today, there are many comparison websites that offer GAP Insurance quotes. These include MoneySuperMarket, Go Compare and Confused.com. You may assume that these premiums are the best you can get. However, the providers of these systems have to pay significant fees to the aggregators when a policy is sold. This will have to be accounted for within the premium cost. Check independent providers away from the comparison sites as a benchmark.

 

How to buy GAP insurance

 

You can purchase GAP insurance from a car dealership or an independent provider. Each option has its pros and cons:


Car Dealership:

Pros: Convenient, as you can purchase GAP insurance at the same time as your vehicle

Cons: Prices can be higher, and coverage options may be more limited


Independent Provider:

Pros: Potentially lower prices and more coverage options

Cons: Requires additional research and may not be as convenient as purchasing from a dealership


When buying GAP insurance, ensure you fully understand the policy's terms and conditions, including coverage, claim process, and exclusions. Always read the fine print and ask questions if anything needs clarification.

 

GAP insurance can be a valuable financial safety net for car owners, particularly those with new vehicles or significant outstanding finance. However, as we have seen, not all GAP products can cover the car's full value.

 

Understanding the coverage, types, costs, and exclusions associated with GAP insurance is essential to decide whether this type of insurance is right for you.

 

Considering the information in this article and conducting your research, you can confidently decide if GAP insurance is a wise investment to protect your financial interests.

 

Published 4/5/2023, written by Mark Griffiths