With millions of people buying GAP Insurance every year, commonly asked questions are expected to arise. What is GAP Insurance? How much does it cost? What can it cover you for? and more.

 

Here are the most relevant questions people will ask about GAP Insurance in 2025, plus a few extra tips and statistics.

 

1. What does GAP insurance cover you for?

 

GAP insurance (Guaranteed Asset Protection) protects you financially if your car is written off (a total loss) due to theft, fire, accident or flood damage. In these circumstances, your comprehensive motor insurer will pay out the car's current market value – often much less than what you paid due to depreciation. 

 

The difference between your car insurer’s payout and your car’s original purchase price (or replacement cost, lease settlement, depending on what type you have) is known as the gap. GAP insurance bridges this financial shortfall so you get paid up to the full amount you paid for the vehicle.

By covering these shortfalls, GAP insurance prevents unexpected financial loss, allows you to afford a suitable replacement vehicle, and gives you peace of mind.

 

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GAP Insurance Fact No.1

Depreciation - The average new car can lose up to 60% of its value in its first three years. The first year is the worst, with up to 40% of its value disappearing in the first 12 months*

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2. Is GAP insurance still available in the UK?  

 

Yes, GAP insurance is back in the UK. Although sales were paused in February 2024 due to the Financial Conduct Authority (FCA) raising concerns that some customers weren’t getting fair value from their policies, they have now resumed following regulatory changes.

 

The FCA intervened to try to make the GAP insurance market more transparent, fairer, and better for customers. Since then, providers have relaunched GAP insurance policies, which now adhere to stricter rules aimed at further protecting consumers.

 

However, it may not all be good news. Some insurers have imposed strict commission caps, making it much less viable for some brokers to sell the product.

 

Some of the insurers behind GAP products have also increased premiums in the last 12 months.

 

The wide range of GAP products for motorbikes, taxis, and other niche areas is not as readily available either.

 

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GAP Insurance Fact No.2

GAP Insurance will only pay if your motor insurance policy writes the vehicle off following a theft, flood, fire or accident and pays out the market value to you in settlement

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3. How much is GAP insurance in the UK?

 

The cost of GAP insurance in the UK is typically between £100 and £500 for multi-year policies, but this can vary. Here are the key factors that affect the cost of your GAP Insurance policy:

• Vehicle Value: Higher value vehicles need higher coverage amounts and, therefore, higher premiums.

• Length of Cover: Policies range from 2 to 5 years. Longer-term policies can be more expensive but cover a greater potential depreciation.

• Type of GAP Cover: Different policy types (Return to Invoice, Vehicle Replacement or Finance GAP) have different premiums, with comprehensive policies slightly more expensive as they offer more cover.

• Vehicle Age and Mileage: Some insurers charge more for older or higher-mileage vehicles because they are more at risk.

 

Many providers like ourselves and other GAP insurers have user-friendly online quoting tools that show the cost of different levels of cover. These calculators allow you to get a quote and see exactly how much cover your GAP insurance provides.

 

For most UK drivers, GAP insurance is an affordable way to get peace of mind; it covers just a fraction of the financial shortfall it protects against.

 

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GAP Insurance Fact No.3

GAP Insurance is subject to Insurance Premium Tax (IPT), not Value Added Tax (VAT).

Insurance Premium Tax is charged at the higher rate of 20% if you buy GAP Insurance from the motor dealer from which you buy the car. If you buy your GAP cover independently online, the IPT rate is the standard 12% you pay for many other insurance policies.

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4. How much does GAP Insurance pay out?

 

You may ask yourself many questions to determine whether GAP insurance is worth buying. These can include the price of your vehicle, how you are buying it, the price of your GAP Insurance quote, and more.

One key question is how much does GAP Insurance pay out?

Given our experience in the GAP Insurance market, we are well placed to give you a good idea of what to expect if you make a GAP Insurance claim.

 

 

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GAP Insurance Fact No. 4

'Combined' GAP Insurance cover mixes two or three types of GAP Insurance into one. For example, Combined Invoice & Replacement GAP provides the highest settlement between your finance settlement, the original invoice price you paid and the replacement costs or the equivalent vehicle when you claim.

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5. What can you claim on GAP insurance?

GAP insurance only pays out in specific circumstances: when your comprehensive motor insurer writes off your vehicle due to theft, accident, fire or flooding. In these situations, your main insurer will pay you out based on the car’s current market value at the time of the claim, which often leaves a shortfall compared to the original purchase price or outstanding finance amount.

 

GAP insurance covers:

• The difference between your main insurer’s market value settlement and the original invoice price (Return to Invoice GAP). 

• The difference between your insurer’s settlement and the cost of a brand new replacement vehicle matching the original specification (Vehicle Replacement GAP).

• Any outstanding finance amount owed on your car that your main insurer doesn’t pay out (Lease/Contract Hire/Finance GAP).

 

But GAP insurance doesn’t cover:

• Deductions or penalties applied by your main insurer, such as unpaid monthly premiums, late payments or deductions made for condition or contributory negligence.

• Any costs related to vehicle repairs (only total losses are covered).

• Modifications or aftermarket accessories not listed on the original invoice.

• Routine maintenance or general wear and tear costs.

 

In short, GAP insurance is only there to cover the financial gap caused by depreciation or outstanding finance when your vehicle is written off or stolen, so you’re not left with unexpected bills afterwards.

 

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GAP Insurance Fact No.5

GAP Insurance can be cancelled at any time during the policy term. A refund may be available if you have not claimed on the policy.

If you have made a claim on the policy, it will end. You cannot transfer or claim a refund if you have had the benefit of making a claim.

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6. What invalidates GAP insurance?

 

GAP insurance will cancel if your main motor insurer refuses to pay out on a total loss claim. GAP insurance covers the shortfall between your motor insurer’s settlement and your original vehicle value. If your main insurer declines the claim entirely, GAP insurance can’t step in to pay out.

 

Everyday situations that will cancel your GAP insurance claim are:

• Negligence: Leaving keys in or around an unattended vehicle, making it an easy target for theft.

• Driving Under the Influence: If you’re involved in an accident while drink-driving or driving under the influence of drugs, insurers will refuse claims and GAP insurance will cancel.

• Unauthorised Vehicle Usage: Using your vehicle for excluded purposes such as courier services, delivery, taxi, ride-sharing or racing unless declared and covered.

• Fraud or Misrepresentation: Providing false or incomplete information to your insurer at policy inception or during the claim process.

• Failure to Maintain Comprehensive Cover: Allowing your main comprehensive motor insurance policy to lapse or switching to third-party only insurance, which isn’t sufficient for GAP cover.

 

To keep GAP insurance valid and pay out when needed, always adhere to your policy terms, maintain comprehensive motor insurance, and inform your insurer of any changes in vehicle use or personal circumstances.

 

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GAP Insurance Fact No. 6

GAP Insurance can only cover an incident that has not happened yet. You cannot take out GAP Insurance 'after the event'.

So if you have just been in an accident or had your car stolen, and you do not yet know if the vehicle will be declared a total loss, taking out GAP Insurance at that point will not cover the outcome of that event.

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7. What do I put for a vehicle price for GAP insurance?

 

The value you put on GAP insurance depends on the policy you’re buying. Generally, use the net invoice price—the actual amount you paid the dealer for the vehicle (excluding extras like extended warranties, delivery fees or road tax)—especially for Combined Return to Invoice (RTI) or Combined Vehicle Replacement (VRI) GAP policies.

• Combined Return to Invoice (RTI) GAP:
  Put in the original net invoice price—the total amount you paid, minus non-vehicle costs. This will ensure the GAP insurance covers the difference between your insurer’s payout and the vehicle’s original purchase price.

• Combined Vehicle Replacement (VRI) GAP:
  Use the net invoice price again. This will enable the GAP policy to pay the difference between your insurer’s payout and the cost of a brand new replacement vehicle of the same make, model, spec and age (as your original vehicle at the time of purchase).

• Finance/Contract Hire/Lease GAP Insurance GAP:
  If you have a Finance GAP policy (covering outstanding finance or lease payments), put in the exact amount borrowed or the total remaining finance amount.

Make sure to put in the most accurate invoice price or finance amount possible as this will affect your GAP policy. Always refer to your original sales invoice or finance agreement documentation to double check and if you’re unsure, your GAP provider can guide you on what to put in.

 

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GAP Insurance Fact No.7

Consumer protection - Consumers buying GAP Insurance in the UK should be protected by the Financial Services Compensation Scheme (FSCS) in the UK, in case an insurer fails, as well as have access to the Financial Ombudsman Service (FOS) too.

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8. What is the maximum amount GAP insurance will pay out?

 

The maximum payout for GAP insurance is the financial shortfall after your primary insurer has settled your claim. This shortfall is the difference between the insurer’s market-value settlement and either:

• The outstanding balance on your vehicle loan or lease, if you have Finance GAP insurance, or

• The original invoice price or vehicle replacement cost, if you have Return to Invoice or Vehicle Replacement GAP.

 

Example:

Your car was purchased for £25,000 and is later declared a total loss. Your comprehensive insurer determines the current market value is £18,000. If your GAP insurance policy is up to invoice price, it would pay out up to £7,000 to fill the gap.

 

Things to remember:

• GAP insurance will never pay more than the original amount owed or the original purchase price of your vehicle (depending on the policy).

• Any deductions made by your main insurer (missed payments, excess charges, penalties, etc.) are not covered by GAP insurance.

• Policy-specific limits or maximum claim amounts may apply, so always check your policy documents for exact terms.

 

In summary, GAP insurance will always pay out to the original value of your vehicle or outstanding finance balance minus the amount your main insurer pays out.

 

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GAP Insurance Fact No. 8

GAP Insurance (also known as Guaranteed Asset Protection or Guaranteed Auto Protection) originated in the United States in the early 1990s. The early products were essentially a form of Finance GAP. This helps cover any shortfall on a lease or finance agreement following a write-off.

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9. How long after buying a car can I get GAP insurance?

The time frame in which you can purchase GAP insurance after buying your car varies depending on both the type of GAP policy you choose and whether your vehicle is new or used: 

• New Vehicles:
  You can have up to 365 days (12 months) from the date you took delivery of a brand-new car to purchase GAP insurance. However, most providers limit between 90 and 180 days as the maximum period you have from buying the vehicle. This extended period is because new cars depreciate rapidly within the first year, and owners often realize the financial risk after some initial ownership.

• Used Vehicles:
  For used cars, the window to buy GAP insurance is usually shorter—typically up to 180 days (6 months) after the vehicle purchase or delivery date. This shorter eligibility period exists because used vehicles tend to depreciate at a more predictable rate.

 

Important points to remember:

• The earlier you purchase GAP insurance, the more financial protection you'll have against depreciation and potential total-loss scenarios.

• After these standard periods (365 days for new cars and 180 days for used cars), GAP insurance options can become limited or unavailable.

• Some GAP providers might impose additional restrictions based on the vehicle's age, mileage, or value at the time you apply.

 

Always verify the exact eligibility periods with your chosen GAP insurance provider. Ideally, arrange your policy shortly after buying your car to maximize your financial protection.

 

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GAP Insurance Fact No.9

GAP Insurance is not a legal requirement. It is an optional insurance policy that can be purchased either from your supplying VAT-registered motor dealer, leasing broker, finance provider, or an independent provider like GAPInsurance123.

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10. What is the best type of GAP Insurance?

 

This is not an easy question to answer because it depends on what and how you are buying it. Let's break this down further.

 

The most comprehensive GAP Insurance : Combined Invoice and Replacement GAP (VRI)

 

If you are buying a new, or nearly new car then Vehicle Replacement GAP Insurance is probably the most comprehensive car GAP Insurance option. This is because it can cover not just the depreciation on the car you take the policy out on but also the inflationary costs of a replacement car.

 

The VRI style GAP provided by GAPInsurance123 differs from many in the market in that it looks to cover you to the higher of your outstanding finance settlement, the original invoice price you paid or the cost of the equivalent replacement vehicle. So if you buy a brand new car in the first place, then it is the cost of the brand new car equivalent at the time you make a claim. That is even if the price has increased.

 

With Total Loss GAP VRI, it is a cash settlement (no car plonked on your driveway of our insurers' choosing), and we do not revert back to the invoice price if you do not replace your car right away (unlike some others).

 

If no direct replacement vehicle is available in the market (who thought Ford would stop making the Fiesta and the Focus?), our policy will use the original invoice price you paid and add 10% to that figure as the replacement cost.

 

Vehicle Replacement GAP cover should be regarded as the most comprehensive GAP cover available. However, not all providers' VRI is as comprehensive as that from Total Loss GAP.

 

The most popular GAP Insurance : Return to Invoice GAP (RTI)

 

Why is this the most popular? It is the type of GAP Insurance offered at motor dealers, price comparison websites, and most independent providers. It is also probably the easiest type of GAP cover to understand.

 

This type of GAP cover can bridge the difference between the write-off settlement from your motor insurance company and the original invoice price you paid for the car.

 

You get back the price you paid by topping up your car insurance settlement with a Return to Invoice GAP settlement. This should allow you enough to settle any finance settlement and what is left is your deposit for a new car.

 

The best GAP Insurance for a lease : Lease & Contract Hire GAP

 

It is important to first state what a 'lease' means. We are talking about where you have a fixed-term rental lease. The vehicle remains the property of the leasing company and you do not have any option to own the vehicle written into the lease agreement (they may offer it to you at the end, but you do not have the legal right to own in the agreement).

 

For such a lease, if the vehicle is written off or stolen, then you would have to pay off the lease settlement at that time. Your car insurance would pay the current market value (the depreciated value) of the vehicle at the time of the write-off.

 

This figure may not be enough to pay off a shortfall, or negative equity, on the lease.

 

This is where Lease & Contract Hire GAP come in. It can cover any shortfall between the settlement from the car insurance provider and the outstanding lease settlement.

 

Lease & Contract Hire GAP has the option of covering up to £3,000 of any advanced rental you made and have paid at the start of the lease. This means you can claim this back and you can use it as a deposit for your next vehicle.

 

Lease GAP Insurance can only be used with this style of lease, where you have no option to own the vehicle written in the lease terms.

 

The best GAP Insurance for a car bought privately : Agreed Value GAP (aka Return to Value GAP) 

 

When you buy a car privately you do not qualify for Return to Invoice or Vehicle Replacement style GAP products. These require that you buy the vehicle from a VAT registered motor dealer to be eligible.

 

If you cannot provide a VAT invoice from a car dealership, you cannot cover the invoice price you paid. Instead, you can look to an Agreed Value GAP Insurance policy, which uses a set value for the vehicle on the day you buy the policy. This value may be set as its Glass's Guide Retail Value, age, and mileage adjusted.

 

The Agreed Value policy can cover the difference between your motor insurer's settlement at the time of total loss and the agreed value set at the time of policy purchase.

 

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GAP Insurance Fact No. 10

GAP Insurance products often have some key features that you should be aware of, including:

A claim limit is the maximum amount you can claim on the GAP cover itself. Not all GAP products have a claim limit, but some do. Always check the upper claim limit before buying.

Dealer and factory-fitted extras—GAP Insurance products can vary in terms of what dealer and factory-fitted extras can be covered. Some extras may be excluded, and some may be included, but to a limit.

Motor Insurance Excess—Most GAP Insurance products will cover some or all of your motor insurance excess deduction if the vehicle is written off. Check the maximum that can be covered.

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So there you have it, the ten most commonly asked questions on GAP Insurance in 2025, plus a few extra bonus facts too.

 

Published 29/03/25, written by Mark Griffiths

 

*Group 1 blog