GAP Insurance Explained

GAP stands for Guaranteed Asset Protection, it is an additional insurance that can be used in the case of your vehicle being written off to cover the difference between what your insurance will pay out and the current value of your vehicle.

What is GAP insurance?

GAP stands for Guaranteed Asset Protection – it is an additional insurance that can be used in the case of your vehicle being written off to cover the difference between what your insurance will pay out and the current value of your vehicle. The amount you receive will be less than you originally paid – this is based on the value of the vehicle at the time of total loss rather than when originally purchased.

If you bought your car on finance and the amount your insurer pays out does not cover the repayment, GAP insurance can also cover this, therefore preventing losses and making sure you can purchase a new vehicle for the same amount as your current one, dependent on the type of GAP insurance purchased.

How much does it cost?

You don’t have to fill out as much information compared with classic car insurance, but the cost depends on a few different things, such as the price of the vehicle and any accidents you’ve had in the last 3 years. In a dealership typically prices can range from £100 to £300.

Is there only one type of GAP insurance?

No, there are actually four types of GAP insurance. The best option for you depends on how you purchased the car, and whether you’d want to buy a brand new car if yours was written off, you would be wanting to purchase a brand new one.

1. Vehicle replacement GAP insurance: this covers the price difference between the amount your car would cost to buy new at the time of the total loss and what your car insurance would pay out.

2. Return to invoice GAP insurance: this can be used for pre-owned and new vehicles, covering the difference between what you originally paid for the vehicle, and what your insurance pays out.”

3. Return to value: this covers the difference between the market value of your car when purchased and what your insurance will now pay out at current market value.

4. Finance GAP insurance: if your insurance pay out does not cover your debt from the finance and car, this will cover the sum owed to a finance company. It may leave you without a car, but at least your debt will be cleared.

How long does the policy cover me for?

This is dependent on your individual policy and the company who you take your policy out with, however typically you can be covered for up to five years. If you own the vehicle, you’d normally want the policy for the maximum length of time. However, if you’re buying the car using finance, your GAP insurance should normally match the length of your finance agreement (unless you’re planning to keep the car after the agreement ends).

What is the maximum claim limit?

This depends on your individual policy. However, typically the maximum claim limit is between £25,000 – £100,000.

What if I sell or change my car?

This depends on your individual policy. However, you can’t usually transfer your policy to a new car. GAP insurance can be paid for in one lump sum or over a period of time, with the option of including it in your finance payments.

In both situations, you can cancel this at any time. However, refunds, policies, cooling off periods and fees vary at each company or dealership. 

When can I not make a claim under GAP insurance?

Typically there are certain situations and cases in which you will not be covered by your GAP insurance and will not be able to make a claim. These can include when:

  • You do not have comprehensive car insurance
  • Your insurer has not declared a total loss
  • Your vehicle is a total loss in result of a competitive event
  • Modifications that have been made after purchase that add value
  • Your excess payment on your car insurance is for example over £250

Before purchasing, check with the provider what is and is not covered to make sure it meets your expectations and requirements. 

When do I purchase GAP insurance?

If you’re buying the vehicle through finance, you can get GAP insurance from the dealership you bought the car from. The timing is up to the individual dealership – sometimes you’ll need to purchase GAP insurance before the vehicle is collected, or within a certain amount of time. If you already own the vehicle, you can purchase GAP insurance at any time through a number of different channels, including your current insurer if it’s something they offer.

Got a question about GAP insurance? Call for a chat or drop into one of our dealerships where one of our friendly team will be happy to help!

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