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GAP Insurance Comparison: Unveiling the Best Options
GAP Insurance can be a complex subject. In some cases, there is more than one choice available for GAP cover. Here we try to help explain your options and what you need to check when comparing GAP protection options.
Understanding the need for a comprehensive comparison
What is GAP Insurance?
GAP Insurance is an additional form of protection that can protect against financial loss if your vehicle is written off or stolen. This loss occurs due to depreciation in the value of your car since the time you first secured or purchased it.
If your vehicle is declared a total loss following an accident, fire, flood or theft, then your motor insurance payout may only cover the market value of your car at the time of the claim. This could be far less than you originally paid for the vehicle. 
This is where GAP Insurance can help. A GAP Insurance claim can top up your motor insurer settlement. Different types of GAP cover can top you up in different ways. Here we will explain the different outcomes you can get.
When comparing GAP Insurance quotes and products, we will highlight what you need to know.
DID YOU KNOW - 'GAP' is short for Guaranteed Asset Protection?
Importance of GAP insurance for vehicle owners
Why do car owners buy GAP Insurance in the first place?
There are several reasons why GAP Insurance coverage can provide some peace of mind to car buyers. These include:
Cars lose value - Depreciation is simply a fact of life whether you own a car outright, have it on a hire purchase or PCP deal through a finance company, or lease the vehicle.
A comprehensive car insurance policy may be less 'comprehensive 'than you think - your motor insurer may only provide the current market value of your car if they write off the vehicle as a total loss.
You could be left with a financial loss if the vehicle is written off or stolen - the market value settlement from your car insurance provider may not be enough to pay off your lease or finance settlement. Even if you own the car outright, you may need to find funds unexpectedly to replace your vehicle.
Understanding the need for a comprehensive comparison
There are many issues you may face when you look to compare GAP Insurance quotes:
Not all GAP Insurance coverage is the same - there is no 'one size fits all' version of GAP Insurance. There are several types of GAP Insurance policies, and they can provide cover in different ways and provide different settlement amounts.
Not all GAP Insurance providers have the same terms and conditions - even where the GAP Insurance type shares the same name, they can provide quite different coverage. You must know what to look for when getting a GAP Insurance quote.
Exploring GAP Insurance
GAP Insurance is often introduced as part of the sale process at a car dealership. Once the car dealer has agreed on the sale of the vehicle to a customer, they may provide information, details and premium prices on a range of additional products like GAP Insurance, tyre and alloy wheel insurance and minor bodywork and cosmetic repair insurance.
Having been provided with this information, your motor dealer must give you time to explore your options with GAP Insurance cover. This can include searching the independent market for alternative cover and deciding whether to cover at all.
It should be stressed that this is a critical period when you are considering GAP Insurance cover. You can look at several options, and if you choose the wrong one, it could cost you thousands if you make a claim.
How GAP insurance works
The process of how GAP Insurance works is all triggered by your motor insurer writing off the vehicle following an accident, fire, flood or theft.
We expect a standard timeline of events to be as follows.
- The vehicle is involved in an accident, fire, flood, or stolen.
- The motor insurer decides it is uneconomic to repair and return the car, or it has been stolen and not recovered.
- The motor insurer offers you a current market value settlement in compensation for the loss of the vehicle.
- You then claim on your GAP Insurance to top up the motor insurers' settlement.
How your GAP Insurance will top up the car insurance payout will depend on which GAP cover you have. Different GAP Insurance policies work in different ways. More on that later.
Types of vehicles that can benefit from GAP insurance
GAP Insurance is readily available for:
- New and used cars
GAP Insurance can be found for:
- motorbikes
- motorhomes
- light commercial vehicles and vans
Common misconceptions about GAP insurance 
Several myths can circulate regarding GAP Insurance. The most common of these include:
You have to buy GAP Insurance from the supplying motor dealer or leasing company - NO
Your motor dealer should make you aware you can buy GAP cover from independent providers. Indeed, the FCA rules state they need to provide you with information about this.
In some cases, customers still think they have to buy GAP Insurance from the dealer they buy the car from. This is not the case.
You have to buy GAP Insurance for three years - NO
Again, this may come from your discussions with your motor dealer over GAP Insurance. They may offer you a standard GAP policy as part of that process. This may be for a maximum of three years only.
In the independent market, you can find standard Return to Invoice GAP for four years and even five years with some providers. You can also get GAP cover for less than three years if that suits you.
Return to Invoice GAP is the most comprehensive level of GAP Insurance cover available - NO
Return to Invoice is often the only type of GAP cover available from a motor dealer. This may lead you to think it is the most comprehensive type available. This is not the case.
Most independent GAP Insurance providers will have an alternative Vehicle Replacement GAP Insurance cover. Where this can be more comprehensive than Return to Invoice happens when the cost of the equivalent replacement vehicle is more expensive than the original price paid.
This can happen when you buy a brand new car at, say, £30,000; when it is stolen in three years, the equivalent brand new car is now £34,000.
Back to Invoice can only cover you back to the £30,000 you paid for the original car.
Vehicle Replacement cover can top you up to the £34,000 replacement cost.
Factors to Consider in GAP Insurance Comparison
Coverage options: Understanding the different types of coverage provided by GAP insurance
There are several different types of GAP Insurance in the UK marketplace. We have specialist guides on these, with in-depth explanations. However, the list, with brief descriptions, is as follows:
Finance GAP Insurance - to cover the difference between the motor insurers' settlement and the outstanding finance balance on a hire purchase or personal contract purchase agreement.
Return to Invoice GAP Insurance - to cover the difference between the car insurance settlement and the original purchase price paid.
Vehicle Replacement GAP Insurance - to cover the difference between the standard car insurance settlement and the cost of the equivalent replacement vehicle. If you buy a brand new car, for example, then it is the cost of a brand new replacement vehicle when you make a claim.
Contract Hire GAP Insurance (also known as Lease GAP Insurance) - specifically designed for lease agreements where there is no option to buy the vehicle. It pays the difference between the motor insurance settlement and the outstanding lease settlement.
Negative Equity GAP Insurance is similar to finance GAP in that it is designed to cover the difference between the motor insurer payout and the outstanding finance settlement. However, it will also cover negative equity carried over from a previous finance agreement on your part exchange vehicle.
Agreed Value GAP Insurance (also known as Return to Value) - pays the difference between the car insurance settlement and the value of the vehicle at the time you took out the policy. This 'agreed value' is defined by the Glass' Guide value for the car, age and mileage considered.
The choice of GAP Insurance depends on your purchase and what you want to cover.
Cost considerations: Comparing premiums price
If you compare GAP Insurance offered by your motor dealer to equivalent policies found online, there is one particular aspect you will notice first - the difference in premium price.
In general, if you compare a like-for-like GAP policy from a motor dealer to one found online, the motor dealer policy will carry a much higher premium price.
Why? There are a couple of main reasons.
Tax-efficient GAP Insurance
When you buy Guaranteed asset protection insurance from a motor dealer, the higher rate of Insurance Premium Tax is payable. This rate is currently 20%.
When you buy GAP Insurance from someone independent from the vehicle sale, e.g. an online broker, then you pay the standard rate of Insurance Premium Tax. That is currently 12%.
Therefore the most tax-efficient way to buy GAP Insurance in 2023 is to avoid purchasing it from your motor dealer. You will save at least 8% in tax right away.
Differences in business models
The primary function of a motor dealer is to sell vehicles. GAP Insurance and similar products are considered a secondary sale or an 'add on'.
This means that the motor dealer will only ever sell GAP Insurance to one of their own customers.
This means even the largest motor dealer sites may sell only a few hundred GAP Insurance policies a year. Online brokers could sell tens of thousands per annum.
Online brokers will present more business to an insurer, so they would be best placed to get better rates for products like GAP Insurance.
As motor dealers only sell a small number of GAP products comparatively, they may expect larger commission payments to be included in the premium price. Online brokers may employ more of a high volume/low commission model.
You will generally find cheaper GAP Insurance products away from your motor dealer.
Policy terms and conditions: Examining the fine print, including eligibility criteria, claim process, and exclusions
Most GAP Insurance terms and conditions will vary from other products even where they bear the same title.
It would be best to decide what policy features are important to you. Then you can compare 'like for like' products to see if you have any advantages.
Let's give you an example.
When you check different providers for Vehicle Replacement GAP Insurance products, they vary wildly. 
VRI GAP Policy 'A' may:
- Pay the higher of the outstanding finance balance, the original invoice price, or the future replacement cost. A 3 in 1 policy that covers all situations.
- Pay cash settlements
VRI GAP Policy 'B' may:
- Pay only the higher of the outstanding finance balance or the future replacement cost. If the future replacement cost is lower than the price you first paid, then policy 'A' could have paid you more in a settlement.
- Replace your vehicle with one of the insurer's choices and supplies. If you do not accept a replacement vehicle, they only pay the original price you paid, and you lose any settlement for the increased replacement cost.
In this example, both GAP Insurance products may be named 'Vehicle Replacement', but one could pay you a far higher cash settlement than the other.
Claim settlement process: Evaluating the efficiency and transparency of claim settlements
You need to check a few aspects of the claims process to ensure you won't have any issues if you go through that process.
You may be forgiven for thinking that the company you buy the GAP Insurance from will handle your claim from end to end. This is rarely the case.
Most GAP claims are processed by an expert team appointed by the insurer or even the insurer themselves.
Check online reviews for any signs of claims issues and ask about them. Remember, the '5 Star' reviews displayed on the provider's website look lovely. However, they are hand-picked and should be taken as such.
Customer service and support: Assessing the responsiveness and reliability of insurance providers
Assess how long and how specialist the GAP Insurance provider is. Online comparison websites happily feature GAP providers who have been supplying GAP Insurance for ten years or ten minutes. You need to do more detailed research to know the experienced providers from the novices.
Key Takeaways
When making a GAP Insurance judgement, several vital facts must be considered.
Where are you buying your GAP Insurance?
Motor dealers will be much more expensive than online providers for like-for-like GAP cover. GAP Insurance cost is lower online.
Which GAP Insurance type do you need?
Have you bought a new car with a heavy discount? Vehicle Replacement GAP could be your best choice.
Have you bought a used car with a 20% deposit on HP finance? Return to Invoice GAP is a great choice.
Have you taken a new lease car but with no choice but to purchase the vehicle? You can only take Lease and Contract Hire GAP.
It would help if you thought about what GAP Insurance covers, and then you can make the best choice.
Is GAP Insurance worth it?
The decision as to whether you need GAP Insurance or not is just a choice for you. However, if you ask yourself how GAP Insurance works, compare cover and providers, and what you need GAP Insurance policy cover to do, then your choice should be much easier.
Published 3/6/23, written by Mark Griffiths
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