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How much does GAP Insurance cost?


When comparing the types of GAP Insurance available at both motor dealers and online providers, you will see various premium prices on different GAP Insurance quotes.


Guaranteed Asset Protection, the full name for GAP Insurance, also comes in various policy lengths. This and the difference in Insurance Premium Tax rates can all impact the GAP Insurance cost you see.


In the following sections, we'll delve into the specifics of GAP Insurance costs, the factors that influence these costs, and the differences between purchasing from a dealership versus an independent provider. We'll also look at a case study of an independent provider to illustrate these points further.



The Cost of GAP Insurance


Several factors influence the cost of GAP Insurance. Here we will list factors impacting GAP Insurance policies and premium costs.


Type of GAP Insurance


When you compare GAP Insurance types, you will see that they can cover you differently. They can also provide different levels of settlement amounts. The more comprehensive the level of cover, and therefore the potential of a higher settlement, the more that type of GAP cover may cost.  How much is GAP Insurance?


The most expensive style of GAP Insurance - where the 'full value' of the vehicle may be paid out. These would be Return to Invoice, Agreed Value and Vehicle Replacement policies.


GAP products that may only cover a shortfall on a finance agreement are cheaper types of GAP Insurance. These would be Contract Hire GAP Insurance, Lease GAP Insurance, Finance GAP Insurance and Negative Equity GAP Insurance.


The period of GAP Insurance cover


When considering coverage, deciding how long you need GAP Insurance is essential.


The longer term you take GAP cover for then, the more expensive the policy will be. This is because the longer you have the policy, the higher the potential settlement could be on the GAP policy. This extends the insurer's risk, and they will charge more for the policy.


GAP Insurance products may be available for between 1 and 5 years. Generally, most products are not renewable, so whatever length of cover you choose is your maximum length.


The value of your vehicle


The higher your vehicle's value or purchase cost, the more expensive your GAP Insurance will be.


This is because the higher value of a vehicle, the more it can lose in value. GAP Insurance covers depreciation, so this is why premiums are more expensive on more expensive cars.


Generally, the average new car is more expensive than the average used car. Therefore you may expect GAP Insurance to be more costly for brand-new cars than for second-hand vehicles.


Where you buy GAP Insurance from


When comparing an equivalent GAP Insurance quote from a motor dealer with an online provider, you will see that the premium from the online broker is cheaper even for the same cover.


How is a GAP Insurance premium split up?


GAP Insurance premium prices are made up of three basic elements:

  • Commission for the provider - this can be the motor dealer, finance company or online provider who sells the GAP cover to you.
  • Underwriting costs go to the insurer, who has to split this between underwriting costs for claims, distribution costs and their commission.
  • Insurance Premium Tax - the tax that goes to HMRC. This can be 20% if you buy the GAP policy from the motor dealer who sells you the vehicle. This drops to the standard 12% if you buy the cover from an independent provider.


GAP Insurance from Dealerships


When purchasing a new vehicle, the dealership often offers GAP Insurance as part of the package, especially when finance is involved. This is a convenient option as it lets you take care of all your vehicle purchase and insurance protection in one place. However, this convenience can come at a cost.


The average cost of GAP Insurance from a dealership is around £350 for three years of coverage. This price can be higher than independent providers due to the convenience factor and the dealership's overhead costs. Dealerships have physical locations, sales staff, and other expenses that can drive up the cost of their products and services, including GAP Insurance.


You also pay a higher rate of tax (Insurance Premium Tax) when buying GAP cover from a motor dealer.


However, it's important to note that not all dealerships are created equal. Some may offer more competitive rates, so it's always a good idea to shop around and compare prices before deciding.


GAP Insurance from Independent Online Providers    GAP Insurance cost


Independent insurance providers often offer more competitive rates for GAP Insurance. These providers operate separately from car dealerships and specialise in various types of insurance products. The cost of GAP Insurance from independent providers starts from around £90 for three years of coverage. This lower cost can be attributed to lower overhead costs and the competitive nature of the independent insurance market.


Independent providers don't have the same overhead costs as dealerships, which allows them to offer more competitive rates. They also operate in a highly competitive market, which drives them to offer attractive prices to win over customers.


You will only pay the standard rate of 12% Insurance Premium Tax (correct as of 10/6/2023 in the UK).


Additionally, independent providers often have more flexibility regarding the policies they offer. They may offer policies with different terms and coverage options, allowing you to customise your GAP Insurance to fit your needs better.


Case Study: GAPInsurance123


GAPInsurance123 is an independent GAP Insurance provider that offers a compelling case study on the benefits of choosing an independent provider over a dealership. Trading since 2010, we offer policies that are more cost-effective than those typically provided by dealerships, with savings running into hundreds of pounds.


A price comparison was undertaken by motoring giant WhatCar, between GAP Insurance premiums they found at motor dealers and online providers.

GAP Insurance price comparison - 3-year RTI GAP
  Seat Leon £24,065 Kia Sorento £39,100 BMW X5 £69,915 Volvo XC40 £34,080
Motor Dealer Showroom Premium £359 £389 £699 £399
GAPInsurance123 Premium £166.68 £184.99 £270.54 £184.99


Here are the results when comparing the dealer premiums with the GAP Insurance costs from GAPInsurance123. GAP Insurance quote premiums from GAPInsurance123 are correct as of 10/6/23.


This is based on a three-year Return to Invoice GAP policy.


GAP Insurance Cost - Key Takeaways


  • The cost of GAP Insurance can depend on several factors
  • You will find better value for money away from the motor dealers and with online providers
  • You can buy GAP Insurance in the most tax-efficient way with online providers


FAQ Section


Q: Is GAP Insurance paid annually?


A: GAP Insurance is typically an annual, renewable policy. Therefore not priced per year but rather for a set period of multiple years. For example, with GAPInsurance123, we can offer GAP cover for either 2, 3 or 4-year duration.


Q: Can you get GAP Insurance on any car?


A: Yes, you can typically get a GAP Insurance quote on any car you buy, finance, or lease. However, the specifics can vary depending on the insurance provider and your motor loan or lease terms.


Q: Can you take GAP Insurance out at any time?


A: Generally, GAP Insurance is purchased when you buy or lease your car. However, some insurance providers may allow you to purchase GAP Insurance after this point, although there may be restrictions on how long this can be done after the purchase.


Q: What does GAP Insurance cover you for?


A: GAP Insurance covers the difference between the actual cash value of your vehicle and the amount you owe on your car finance or lease at the time of a total loss. This can include situations where your car is stolen or damaged beyond repair.


Q: Who is the GAP Insurance paid to?


A: This depends. If outstanding finance needs settling, then the amount required can come out of the GAP Insurance policy. If the policy provides a surplus once the finance has been paid, then this can be paid to the policyholder.


The GAP Insurance payout can be made to the policyholder if the vehicle is owned outright.


To summarise, depending on the liabilities at the time of your claim, the GAP settlement can go to the finance company, the policyholder or a mixture of both.


Q: How many claims can I make on GAP Insurance?


A: GAP Insurance policy can be claimed once.


If your car is declared a total loss, you can claim your GAP cover to top up your motor insurance payout. Once you have been through the claims process, that is the GAP policy spent.


When you replace the vehicle, you can buy GAP Insurance for your new car.


Q: Can I claim on my GAP Insurance?   GAP Insurance premium prices


A: The following conditions must apply to claim on your GAP Insurance policy.

  • The vehicle has been written off or stolen following a fire, flood, accident or theft.
  • Your car insurer has provided a current market value settlement.
  • You are the GAP Insurance policyholder.
  • The vehicle is registered to you (or if on a lease, the lease is in your name)
  • The finance agreement is in your name.
  • You are the main insured or a named driver on a fully comprehensive motor insurance policy.
  • You have suffered a loss that is covered under the GAP Insurance policy.


Q: Does GAP Insurance cover balloon payments?


A: In a roundabout way, yes. Your balloon payment (the large payment left at the end of a PCP finance deal) is part of your finance settlement. So if the vehicle is written off, you will get a settlement figure on your finance agreement to pay.


Your car insurance provider then pays out the current market value of your vehicle in a settlement. Depending on which type of GAP Insurance you have, you could see your fully comprehensive car insurance settlement topped up to:

  • the outstanding finance settlement (Finance GAP Insurance)
  • the original invoice price you paid (Return to Invoice GAP Insurance)
  • the future replacement car cost (Vehicle Replacement cover)


In all cases, GAP Insurance can help cover the balloon payment.


Q: How long after buying a car can you take out GAP Insurance?


A: While GAP Insurance is typically purchased when buying or leasing a car, some providers may allow you to purchase a policy within a certain period after this.


A maximum period of 90 days may be common with car dealership GAP products. Many online GAP Insurance providers can alloy 180 days or even 365 days under certain conditions.


Q: What is the highest level of GAP Insurance?


A: The highest level of GAP Insurance would be a Vehicle Replacement GAP Insurance policy. This is because this style of GAP coverage could provide the biggest settlement.


VRI GAP Insurance is designed to cover between the motor insurer's current market value settlement, at the point the car is written off or stolen, and the higher of:

  • the outstanding financial balance
  • the purchase price originally paid
  • the cost of the equivalent replacement car


The equivalent replacement car would be the same age, mileage and specification as your vehicle was on the day you bought it. If you first purchased a brand new car, it would be the equivalent brand new replacement car at the time you claim.


Published 10/6/23, written by Mark Griffiths