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GAP Insurance is it worth it?

 

If you are considering buying GAP insurance for your vehicle, then you will, no doubt, be asking a number of questions and queries to decide whether the benefits of GAP Insurance make it worthwhile for you. Guaranteed Asset Protection (the long name for GAP) has a number of benefits and features that you may want to consider.

 

Here we provide you with a number of aspects you may want to consider, plus access to more in depth guides on the subjects. Is GAP Insurance worth it?

 

 

Why would you buy GAP Insurance?

 

GAP Insurance is an additional level of financial protection for vehicle owners. If the vehicle is written off following a theft, accident, fire or flood, then GAP Insurance can add a financial sum to your car insurance current market value settlement. How much this settlement is depends on which type of GAP Insurance policy you have.

 

There can be many reasons that may motivate you to buy GAP Insurance coverage. These include:

 

1. Newer vehicles benefit more: GAP Insurance is more beneficial for newer vehicles, especially if you're signing long-term finance deals on brand new cars, as it can cover the outstanding finance if the insurer's pay-out is insufficient. New vehicles come with a higher price tag compared to their used equivalents. This means they can lose more value over time. A claim for GAP Insurance could

2. Protection against a financial or lease shortfall: GAP Insurance can help bridge the financial gap between the insurance pay-out and the amount owed on a finance loan or lease agreement.

3. Replacement for a brand new car: If you want the assurance of being able to replace your car with a brand new version in the event of theft or write-off, GAP Insurance provides the answer.

4. Expensive models with rapid depreciation: If you own an expensive car model that depreciates quickly, GAP Insurance can help bridge the gap between the insurance pay-out and the cost of replacing the car.

5. Low savings or limited funds: If you have minimal savings or limited alternative funding sources, GAP Insurance can provide financial protection and avoid potential debt in case of a total loss. According to the FCA, over a third (34%) of adults in the UK have less than £1,000 in savings. This figure increases to 47% for people aged between 18 and 24 years old.

 

For more on the types of GAP Insurance, please read: What are the different types of GAP Insurance?

 

The biggest issue that GAP Insurance addresses - Depreciation

 

One aspect of owning a vehicle that is almost universal for all is that your vehicle will lose value over time. Depreciation is just a fact of life. Mix that with the unforeseen situation where your vehicle is written off or stolen, then the spectre of depreciation can come looming up very quickly.

 

In the event of a total loss situation, GAP Insurance can help cover an element of depreciation, depending on which GAP Insurance policies you have in place.   GAP Insurance is it worth it?

 

For more on depreciation, please read: Understanding Car Depreciation: Your Ultimate Guide

 

GAP Insurance cost - How much is GAP Insurance?

 

The cost of a GAP Insurance premium can be determined by a number of factors. When you enter your details for a GAP Insurance quote, the following factors can all contribute to your premium.

 

The type of GAP Insurance

 

Generally speaking, the potential for the highest GAP Insurance settlements would be from either a Return to Invoice GAP Insurance or a Vehicle Replacement GAP Insurance policy. Contract Hire GAP Insurance or Finance GAP covers the outstanding finance on a Personal Contract Purchase or Hire Purchase agreement. You would expect a lower settlement and, therefore, a lower premium cost.

 

The length of GAP Insurance cover

 

The longer you take GAP Insurance for them, the higher the premium. This is simply because you are extending the risk over a longer term, and the potential payout make rise as the vehicle depreciates in value.

 

Where do you buy GAP Insurance from

 

There can be quite a difference in equivalent premium prices from different car GAP Insurance providers.

 

GAP Insurance at a car dealership can be expensive. This can be due to a number of reasons, including higher tax rates, different commission models and longer supply chains.

 

Buying from an online provider is normally much better value.

 

Is GAP Insurance only for new cars?

 

It is a common comment here that there may be a sense that GAP Insurance is only needed for a brand new car. On the face of this, that statement may have some sense.

 

New cars are more expensive than their used car counterparts. This means you have either committed more of your own funds or committed to taking more of the purchase.

 

Providing extra financial protection to add to that given by your car insurance can make sense. However, car insurance on a new car can also provide protection you may not be aware of.

 

Some car insurance providers give a new car replacement vehicle if the vehicle is written off in the first year (sometimes longer). This may mean you do not need GAP Insurance as well. However, it may not be that simple.

 

You may also like to read : Deferred GAP Insurance

 

You may also like : New Car GAP Insurance

 

There are also clear arguments to have GAP Insurance on used vehicles as well. Although they may not depreciate in value as quickly as a new car, used cars still depreciate.

 

You will still only get a market value settlement from your car insurance company in the event of a write off.

 

You may still have an outstanding amount to pay to your finance company.

 

You still have to replace the car.

 

Many of the same arguments for a form of Guaranteed Asset Protection on a new car also exist for a used car as well.  Is GAP Insurance worth getting?

 

Further reading: Used Car GAP Insurance

 

Is GAP Insurance only for when you have finance on the vehicle?

 

When considering whether GAP Insurance is worth it for you, many can assume you only take cover if you have a finance agreement on the car. Car finance of some kind can cause some concern to consumers, and getting some form of GAP to add to the protection from the car insurer can be helpful.

 

A standard car insurance policy does not concern itself with a finance settlement. Fully comprehensive car insurance only covers you for the market replacement value of the car at the time of your claim.

 

If you have finance, then you may owe more on the finance settlement than the market value settlement then a range of GAP Insurance products may help you cover this, including:

 

Finance GAP Insurance (or Negative Equity GAP Insurance), Return to Invoice GAP Insurance or even Vehicle Replacement cover.

 

But even when you have not got finance on the car, there is still an argument for GAP Insurance cover to be in place. Where you have paid cash for a vehicle or taken it on a personal or bank loan, you can still look at the likes of Return to Invoice GAP or Vehicle Replacement GAP to protect your investment.

 

You may like to read: Can I Get GAP Insurance on a Bank Loan? and Can I Get GAP Insurance on a Bank Loan?

 

So is GAP Insurance worth it? We hope we have given you some help with the most important aspects to consider to make the right decision for you.

 

Published 29/7/23, written by Mark Griffiths