What is GAP Insurance?

 

GAP Insurance covers the difference between your motor insurer’s payout and what you originally paid, still owe, or need to replace your vehicle if it’s written off or stolen.

 

GAP (short for Guaranteed Asset Protection) protects you from being left out of pocket if the motor insurance policy is claimed on, and the vehicle is declared a total loss.

 

Here we explain, briefly, what GAP Insurance is and how it can help you.       

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How GAP Insurance Works

 

If your car is written off or stolen, your motor insurer usually pays its market value at the time of the claim. The market value is what it may be worth at the time of a claim, not what you first paid.

 

That market value amount can be much lower than what you paid or still owe on any finance or lease agreement. GAP Insurance “fills the gap” so you’re not left with a financial shortfall.

 

Depending on the policy type, it can return you to your original purchase price, pay off any remaining finance or lease, or cover the cost of a like-for-like replacement, such as the vehicle you first insured.

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Types of GAP Insurance

 

• Return to Invoice – Covers the shortfall between your insurer’s payout and the original invoice price.
• Vehicle Replacement – Covers the cost to replace your car with the same make, model, and spec, even if prices have risen.
• Lease & Contract Hire GAP – Pays off any outstanding lease settlement if your motor insurer’s payout isn’t enough.

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When GAP Insurance Helps Most

 

• New or nearly new cars that may lose value quickly
• Cars on finance, lease, PCP, or HP agreements
• High-value or specialist models
• Times when car prices have increased since you bought yours
• If you are worried about a shortfall if the vehicle is written off

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Key Exclusions to Know

• No cover if keys are left inside the vehicle
• You must be fully comprehensively insured
• Doesn’t apply unless your car is declared a total loss by your motor insurer
• Your motor insurer must pay a market value settlement to you
• It must usually be purchased within a set period after buying your car

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Example GAP Insurance claim and benefit

 

You buy a car for £20,000. Two years later, it’s stolen. Your insurer pays £13,000 (its market value).

GAP Insurance (Return to Invoice, in this case) covers the shortfall of £7,000, so you’re not out of pocket.

 

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