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What is the best level of GAP Insurance?


GAP Insurance is a subject that can be complex when you first come across it. Several types of GAP Insurance are available, so how do you know which is the best, and more importantly, for you?


Here we explain what each type of GAP Insurance can do in different circumstances.


Understanding GAP Insurance


Guaranteed Asset Protection, or GAP insurance, is additional insurance that covers the 'gap' between the amount your car insurance would pay out if your car were written off or stolen and either the price you paid for the vehicle, the cost of the equivalent replacement car or the amount you still owe on it.


For a valid claim on GAP Insurance in the UK, your motor insurance company must first declare the car a total loss and pay out the market value at the time of a settlement. The total loss would come following an accident, fire, flood or theft.


Different Levels of GAP Insurance                   What is the best level of GAP Insurance?


1. Return to Invoice GAP Insurance (RTI): This insurance covers the difference between your insurer's payout and the original purchase price of the car or the outstanding finance, whichever is higher.


Best for It's ideal for those who want to ensure they can get back what they initially paid for the car.


Available for: New and used car sales from a VAT-registered motor dealer


2. Vehicle Replacement GAP Insurance (VRI): This insurance pays the difference between your insurer's payout and the cost of a brand-new car of the same make, model, and specification. VRI GAP can be available for used vehicles also with specific providers. If the vehicle is used when purchased, it would be the equivalent vehicle of the same age and mileage as when you purchased the original.


Best for It's beneficial for those who want to replace their car with the same standard as the vehicle originally purchased without worrying about price increases. Alternatively, if you get an excellent discount on your car purchase, then the cost of a like-for-like replacement will be higher in all probability.


Available for: New and used cars bought from a VAT-registered motor dealer.


3. Lease/Contract Hire GAP Insurance (CHG): This insurance covers the difference between your fully comprehensive car insurance settlement and the remaining balance on your lease agreement.


Best for: It's perfect for those who have leased their car and want to avoid being left with outstanding payments if their vehicle is written off.


Available for: Leased vehicles secured via a motor dealer or leasing company.


4. Agreed Value or Return to Value GAP Insurance (AVG/RTV): This insurance pays the difference between your insurer's write-off payout and the value of the car at the time you took out the policy.


Best for: For car buyers of a second-hand vehicle purchased privately. Alternatively, it can be used when your current RTI or VRI GAP expires and you want to keep the car for a few years.


Available for: Used car purchases from a private seller.


Which is the best GAP Insurance? - Car buying scenarios


Depending on your circumstances, there may be a choice of GAP Insurance products you could look at. In other cases, there may be only one option. Here we provide a series of everyday car buying situations, your options and which may be the best GAP Insurance solution for you.


A new car purchase of a 'run out' model, with a heavy discount from MRRP. On PCP.


Best GAP Insurance option: Vehicle Replacement GAP


Also available: Return to Invoice GAP


The fact that you have secured the vehicle with a heavy discount means that the cost of the same brand-new car will most likely be much more than you originally paid. In that case, a Vehicle Replacement GAP would provide a higher settlement than an RTI or Back to Invoice GAP. This will allow you to pay off your PCP finance agreement and have the maximum deposit for a new car.


A used car purchase for a vehicle that is two years old and has 20,000 miles on the clock. Bought with a personal loan.


Best GAP Insurance option: Return to Invoice GAP


Also available: Vehicle Replacement GAP


On a used car, where the vehicle has already seen its highest rate of depreciation, the advantage of Vehicle Replacement GAP may not be there. Therefore protecting the original invoice price with an RTI gap insurance may save you money on the premium and still give you a similar settlement amount.


A new car was taken on a lease, with no option to own the vehicle.


Best GAP Insurance option: Contract Hire/Lease GAP Insurance


Also available: None


When you take out a lease for a car with no option, there is only one choice for GAP Insurance. A Contract Hire or Lease GAP Insurance covers the shortfall between your settlement from your car insurance company and the outstanding lease settlement owed to the finance company.


You do not qualify for Back to Invoice or Vehicle Replacement GAP coverage, as both require that you can own the vehicle. This is different from what you can do on a lease.


A used car was purchased from a car auction. Cash purchase.


Best GAP Insurance option: Agreed/Return to Value GAP            Best GAP Insurance UK


Also available: None


A car auction is not a VAT-registered motor dealer or leasing company. Buying a car at an auction (this could include eBay) would count as a private purchase in GAP cover terms.


Agreed Value GAP can cover you back to the car's value on the day you bought it. Glass' Guide determines the value.


The advantage of an Agreed Value policy for a private purchase is that it covers the Glass's Guide retail value, not the auction or trade-in price. This means you can cover the cost of replacing the vehicle from a VAT-registered dealer, not another auction or private sale.


Answering Your Questions


1. What is the highest level of GAP insurance? 


The highest level of GAP insurance is typically Vehicle Replacement GAP Insurance. This insurance covers the financial gap left by your car insurer's payout and accounts for any increase in the car's list price, ensuring you can replace your car with a brand-new one of the same make, model, and specification.


2. How many years is GAP insurance suitable for?


The duration of GAP insurance policies can vary, but they typically last between 1 to 5 years. The exact time depends on the provider and the policy's specific terms. It's crucial to check these details when taking out a policy.


3. What type of GAP insurance do I need for HP?


If you've purchased your car using a Hire Purchase (HP) agreement, you could look at either a Return to Invoice policy or a Vehicle Replacement Insurance policy. Which may be better for you would depend on some further aspects of the purchase like is the vehicle new or used and have you got a heavy discount.


4. What does 'combined' mean on a GAP Insurance policy?


Combined means that two, or more, types of gap insurance have been rolled into one. For example, a Combined Return to Invoice GAP is a Return to Invoice GAP and Finance GAP Insurance in one policy.


The 'combined' element means that you usually get the highest benefit provider between the two types of gap insurance offered in the event of a claim.


With a Combined Return to Invoice GAP, the policy will cover you from the market value settlement from the car insurance policy and the higher of:

  • the original purchase price you paid
  • the outstanding finance settlement


If you look at Combined Vehicle Replacement GAP with GAPInsurance123, this is THREE gap cover types in one policy. In the event of a total loss, then the policy can cover you from the market value settlement from the car insurance provider and the higher of:

  • the original purchase price paid for your car
  • the outstanding finance settlement (if you owe money)
  • the cost of an equivalent replacement vehicle


So the advantage here is that you get the best outcome between the three levels. For example, it can be challenging to decide between a Return to Invoice and a Vehicle Replacement policy. You do not have to choose; the policy does it for you and ensures the maximum settlement.


Takeaways on what is the best level of GAP Insurance


When you want to buy GAP Insurance cover, not all products are made equally. Buying gap insurance makes sense if you pay cash or are looking to protect a finance agreement.


You have to buy the right GAP Insurance policy, of course.


Choosing the best level of GAP insurance for you ultimately depends on your circumstances. By understanding the different types of GAP policies and considering your needs, you can select the best level of coverage that offers you the most peace of mind.


Sometimes you do have more than one choice as well. You need to understand the differences and how each type can benefit you.


If you need help or advice, please get in touch with the experienced team at GAPInsurance123. We are always happy to help with any GAP Insurance queries.


Published 18/5/23, written by Mark Griffiths