INSURANCE GUIDE
Car GAP Insurance UK
What GAP insurance covers, the different types available, and how to buy it cost-effectively.
TL;DR
- GAP insurance pays the difference between your car insurer's market value payout and what you originally paid or owe on finance.
- New cars can lose 15-30% of their value in the first year - GAP closes this depreciation gap.
- Dealer GAP is significantly more expensive than independently purchased GAP - compare before buying at the showroom.
- GAP is most valuable in the first three years of ownership and when there is outstanding finance.
What GAP Insurance Is
Guaranteed Asset Protection (GAP) insurance covers the financial shortfall that occurs when a car is written off or stolen. A standard comprehensive car insurance policy pays the current market value of the vehicle at the time of the loss. Due to depreciation, this market value is almost always lower - sometimes significantly lower - than the price originally paid. GAP insurance bridges this difference, ensuring you can replace the vehicle or clear any outstanding finance without being out of pocket.
Types of GAP Insurance
The main types of GAP insurance are: Return to Invoice (RTI) - pays back to the original purchase price; Finance GAP - pays off the outstanding finance balance; Return to Value - pays back to the value at the time of purchasing the GAP policy (useful for used cars); and Agreed Value GAP - pays a specified agreed sum. RTI is the most popular for new car buyers; Finance GAP is specifically for vehicles purchased on PCP or HP where clearing the finance agreement is the primary concern.
Dealer vs Independent GAP Insurance
Dealers sell GAP insurance at the point of vehicle purchase, often at premiums two to three times higher than equivalent cover from independent GAP insurance providers. The FCA introduced regulations requiring dealers to offer a 2-day deferral period before a GAP policy comes into force, encouraging buyers to compare prices before committing to dealer GAP. Purchasing GAP independently - either at the time of vehicle purchase or within the first 180 days - typically provides the same or better cover at substantially lower premiums.
When GAP Insurance Is Worth Buying
GAP insurance is most valuable in the first three years of ownership when depreciation is steepest. New cars can lose 15-30% of their value in year one. A car bought for £25,000 that depreciates to £18,000 within twelve months would result in a £7,000 shortfall if written off without GAP. After year three, depreciation curves flatten and the financial benefit of GAP reduces. GAP is particularly important when there is outstanding PCP or HP finance that exceeds the vehicle's market value.
Related Guides
Disclaimer
This guide is for general information only and does not constitute financial or insurance advice. Kaeltripton.com is not regulated by the FCA. Always read policy documents in full before purchasing cover.
Frequently Asked Questions
Do I need GAP insurance if I bought my car outright?
If you paid cash and have no finance to repay, GAP insurance is less critical but still relevant. The question is whether you could afford to replace your vehicle at market value if it was written off. If you paid £30,000 for a car that is now worth £20,000, your comprehensive insurance pays £20,000 on a write-off. Whether the £10,000 shortfall to buy an equivalent replacement vehicle matters financially determines whether GAP is worthwhile for a cash buyer.
Does GAP insurance pay out if I am at fault for the accident?
GAP insurance pays the shortfall between your comprehensive insurance payout and the invoice price or finance balance. If your comprehensive insurer pays out for a write-off (which they do regardless of fault for the vehicle damage itself), GAP pays the shortfall. If your comprehensive insurer declines the claim for any reason, GAP will also decline as there is no base payment to top up. GAP is contingent on the primary comprehensive insurance paying the write-off claim.
