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Understanding GAP Insurance: Does GAP Insurance Have an Excess?


Introduction to GAP Insurance and Excess


Insurance excess is a common feature of all kinds of insurance protection nowadays. Many policies will feature an excess requirement, from motor to pet insurance, home insurance to travel insurance.


So in this article, we will help you understand what is an insurance excess and how does it work with GAP Insurance?



What is an excess on an insurance policy?


An excess (also known as a deductible) is the contribution paid by the policyholder towards an insurance claim.


It is usually the first amount paid towards the claim. For example, if you made a car insurance claim, you would first pay the excess amount towards the claim. Your motor insurer will pay the rest.


For example, if your claim would cost £5,000 and you had a £500 excess, then you would pay the £500 excess contribution with your motor insurer paying the £4,500 remaining.


Insurance excess is designed to lower the risk to the insurer firstly by eliminating all claims that do not exceed the excess and reducing any claim cost by the excess contribution. This can then provide a lower premium to the policyholder.


Types of Motor Insurance Excess


There are two types of excess.          GAP Insurance and excess


Compulsory Excess - the amount that the car insurance provider sets as a minimum contribution from the policyholder in case of a claim.


Voluntary Excess - the amount the policyholder sets as a minimum they are happy to pay, in addition to the compulsory excess amount, in case of a car insurance claim.


The idea of adding a voluntary excess amount to the compulsory excess figure is that this increased overall contribution from the policyholder to a claim should bring their annual insurance premium down. The overall risk is lower for the car insurance company, so they should provide a lower premium cost to the insured.


Your fully comprehensive Motor Insurance Excess


Fully comprehensive motor insurance provides you with the legal protection you require to drive your vehicle on the roads of the UK.


You can claim on your car insurance policy if you are involved in an accident, a fire, a flood or a theft.


Should the motor insurer confirm you have an eligible claim, they will charge your excess amount if it is either a fault claim, fire, or theft. If the fault of the claim lies with someone else, a third party, then you should either not be charged your excess at all, or you can claim it back from them.


The Relationship Between GAP Insurance and Excess


Some things about the concept of excess concerning when you buy GAP Insurance need to be clarified.


It's important to clarify that GAP Insurance does not have an excess. So if you make a GAP Insurance claim, you should see no excess deducted from the settlement.


Instead, GAP cover can contribute towards the excess deducted in the car insurance settlement in case of a write-off or total loss claim.


It's a standard feature of GAP Insurance that enhances its value to policyholders.


The Standard Contribution from GAP Insurance


A vehicle GAP Insurance policy typically contributes £250 towards the motor insurance excess. However, some policies may offer a higher contribution. This is an essential feature of GAP Insurance coverage that can provide significant financial relief in the event of a claim.


However, it's essential to read the terms of your policy to understand what your GAP Insurance covers. Each policy can vary. Some may cover a higher excess deduction than £250, for example.


When GAP Insurance Payout Applies


A GAP Insurance claim can only be made when your motor insurer writes off your vehicle, AND the motor insurer pays you the current market value in a settlement.


This could be due to severe damage from an accident, fire, or flood or if the vehicle is stolen and not recovered.  Excess and GAP Insurance


However, it's important to note that not all motor insurance claims will result in a GAP Insurance claim. If the motor insurer repairs or replaces the vehicle for you instead of writing it off, then there is no GAP claim to make.


GAP Insurance also has eligibility and exclusion criteria. These can include the age and mileage when the policy was purchased and the vehicle use.


If the motor excess is charged and the vehicle is written off, then a claim for the excess charges, or a contribution up to the maximum limit, can be made as part of the GAP Insurance payout.


If the motor insurer repairs or replaces your car in a claim but still charges your excess payment, then you cannot make a GAP claim so that no excess contribution can be made.


Key Takeaways on Excess and GAP Insurance


Understanding the nuances of GAP Insurance, including its relationship with excess, is crucial for any vehicle owner in the UK. 


While GAP Insurance does not have an excess, it can contribute towards the excess deducted by your primary motor insurance, providing additional financial protection. 


Always read your policy terms carefully and consult your insurance provider if you have any questions. With the right knowledge and understanding, you can ensure you're adequately covered and prepared for any eventuality.


Frequently Asked Questions about GAP Insurance and Excess Protection


What is GAP Insurance?


Guaranteed Asset Protection, more commonly known as GAP Insurance, is a specialised form of vehicle insurance offering additional financial protection to car owners.


It can only be claimed when a vehicle is stolen or declared a total loss, or 'written off', by the main motor insurance company. The main purpose of GAP Insurance is to cover the 'gap' between the amount your fully comprehensive motor insurance policy pays out and, depending on which type of GAP Insurance you have:


  • the original price or value you paid for the vehicle


  • the outstanding finance settlement on a lease or car loan


  • The replacement cost of a new car


It's a safety net that ensures you're not left financially disadvantaged due to the depreciation of your vehicle.


Are there different types of GAP Insurance policies?


Yes, there are several GAP Insurance policy types available. Each can protect you in a slightly different way.


Return to Invoice GAP Insurance - the most common type of GAP Insurance that bridges the difference between the car insurance payout and the original net invoice price you paid for the vehicle.


Vehicle Replacement GAP Insurance - the most comprehensive type of GAP Insurance. It covers the difference between the motor insurers' settlement and the cost of the equivalent replacement vehicle.


Finance GAP Insurance - designed to cover the difference between the motor insurance settlement and the outstanding finance balance on a hire purchase or personal contract purchase credit agreement. Finance GAP Insurance is often combined with Return to Invoice GAP or Vehicle Replacement GAP.


Lease and Contract Hire GAP Insurance - designed to cover any shortfall between the motor insurers' settlement and the outstanding lease settlement. This particular policy is designed explicitly for lease vehicles.


Does GAP Insurance contribute to any motor insurance claim excess?


No. You can only claim your motor insurance excess contribution element on a GAP policy where you have made a full claim on the GAP Insurance cover. This is when the motor insurer writes off the insured vehicle and charges you an excess against the market value settlement.


If you have a claim on your motor insurance that sees the insured vehicle repaired, the car has not been written off. The excess is still charged, but you cannot make a GAP Insurance claim as the car has not been written off.


Can you buy a policy to cover motor excess claims?


Yes, it is called a Motor Excess Insurance policy. This works because you have a claim with the motor insurer, and they charge you your excess in processing the claim and repair.


Once you have paid the excess, you can claim back the excess you have been charged from a Motor Excess Protection policy up to the claim limit.


Published 11/7/23, written by Mark Griffiths